THE MAN BEHIND THE CURTAIN

Elder Liu He remains China's economic guide, including on US strategy


South China Morning Post
Fri, June 23, 2023

Despite his retirement, former Chinese vice-premier Liu He is still being regularly consulted on important financial and economic affairs - particularly on issues related to the United States, as Beijing ponders how to deal with Washington in these areas.

Liu, one of President Xi Jinping's most trusted confidants, still attends internal meetings on economic affairs and remains highly influential, even though he officially stepped down from all posts after the leadership reshuffle in March, five separate sources told the South China Morning Post.

One source said the leadership highly values Liu's rich experience and knowledge. "He has been asked to give input on key issues on domestic economic policies and how to deal with the United States over trade and economic matters," said another.

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Following US Secretary of State Antony Blinken's visit to Beijing, more American officials, including Treasury Secretary Janet Yellen may also make a trip to China, according to another source.

Liu's vast knowledge and experience are seen as invaluable as Beijing works on its strategies to deal with the US - cooperating in some areas while pushing back in others.

Liu Wan-Hsin, a senior researcher at the Kiel Institute for the World Economy in Germany, said retaining Liu's services could send a strong message that economic development remains a top priority for the Chinese government.

"This is consistent with the information that we have gathered from the National People's Congress in March," she said.

"Because of his expertise and experience, as well as his networks and connections with key decision-makers in other countries, [Liu] can be an asset for China to rebuild economic relationships with other countries, particularly the Western economies."

The 71-year-old Harvard-trained economist was in charge of a huge portfolio - from the hi-tech drive to state-enterprise reforms and broader industrial policies - until his retirement from all official government positions and the party.

In addition to stepping down from these posts at the party congress last October and the "two sessions" parliamentary meetings in March, Liu also retired in April from his position as director of the general office of the Central Financial and Economic Affairs Commission, according to a source.


New vice-premier He Lifeng has since been appointed to the position on the commission, China's highest policy coordination body on economic affairs.

As the Chinese convenor of the US-China Comprehensive Economic Dialogue, Liu led the trade talks with Washington and was pivotal in designing Beijing's technology and economic plans to break the stranglehold on China's economy.

In January 2020, Liu travelled to Washington and signed the phase-one trade deal with then-US president Donald Trump after rounds of difficult negotiations.

Although the deal was never fully carried out, it brought a short respite to the economic war between the two powers. It remains the only economic agreement signed by the two sides over the past three years.

Liu is widely regarded as a "pro-market" leader and is a familiar face to foreign governments and investors. On his last overseas trip as vice-premier in January, Liu met Yellen in Zurich.

"He often took the lead in dealing with foreigners. It's an encouraging sign for foreign businesses that he's still involved, especially at a time where China is struggling to bounce back from Covid-19 and open up to the world again," said Rhodium Group senior analyst Mark Witzke.

Neil Thomas, a fellow at the Asia Society Policy Institute, also believes Liu still has plenty to offer China's economy.

"Liu He was a key figure in advancing the supply-side structural reform. That helped to upgrade China's economic structure by reducing its financial leverage and property inventories," he said.

"He is a fluent English speaker with significant international experience. He has been a real asset to Chinese diplomacy, especially when he helped negotiate the US-China phase-one trade deal," Thomas said.

"But the US-China relationship is much bigger than any one policy adviser and Liu He's involvement is unlikely to have a significant impact on the overall state of bilateral ties."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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