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Chinese Commerce Minister Zhong Shan, left, President Xi Jinping and Vice Premier Liu He will need to tread carefully at Beidaihe, where Xi's handling of U.S. relations will likely be a big topic of discussion. (Nikkei Montage/Getty Images/Reuters)
China up close

Xi bolsters trade team to counter Washington and party elders

Annual gathering of party luminaries nears, with little progress in Sino-American talks

KATSUJI NAKAZAWA, Nikkei senior staff writer | China

TOKYO -- Supported by two aides, 92-year-old former President Jiang Zemin walked slowly down the aisle toward the bereaved family of Li Peng to convey his condolences.

The scene came Monday during the funeral of the former premier who in 1989 declared martial law during the Tiananmen Square crackdown. It demonstrated Jiang's undiminished presence ahead of the annual Beidaihe meeting.

The annual gathering of current party leaders and retired elders at the seaside resort of Beidaihe, Hebei Province, is thought to be days away.

Jiang's appearance caused a stir in Beijing political circles and offered a contrast to Hu Jintao, another former president, who chose not to attend the funeral.

For current President Xi Jinping, it was another reminder of the complexity of Chinese politics. Despite abolishing term limits for the Chinese presidency and rising to become perhaps China's most powerful leader in decades, Xi has had to answer to Chinese Communist Party elders as they informally discuss political issues in Beidaihe.

Former President Jiang Zemin shakes hands with a member of Li Peng's family, subtly letting China's current leaders know his presence will be felt at the Beidaihe meeting.

Against this backdrop, trade talks between the U.S. and Chinese governments finally resumed on Tuesday. There were two notable changes. First, the venue was in Shanghai. Second, there was a new face in the Chinese delegation.

Commerce Minister Zhong Shan, who belongs to a group of close aides to Xi and had not been present at the previous 11 rounds, joined the team alongside Vice Premier Liu He.

When sports teams replace starters or change formations late in games, it is usually because they are behind. Why, then, did Xi put Zhong on the field?

"In addition to Vice Premier Liu He, whom he trusts, Xi has deployed a second aide to the talks," a Chinese source said. "He is preparing for a protracted battle, with eyes set on next year's U.S. presidential election."

Said another Chinese source: "Xi is preventing any opportunity for party elders or rivals to interfere in U.S. talks. He is determined to take the reins of the negotiations himself, fully understanding that the outcome of the negotiations may affect domestic politics."

The addition of Zhong is an admission that Xi's original strategy of bringing the U.S. trade talks to a quick conclusion, using his close aide-cum-economic adviser Liu He as the sole negotiator, has not gone well.

The talks bogged down, and the Chinese economy clearly started to slow. As a result, pressure gradually mounted on Xi from within the party, including its elders.

The situation came to a head in May, when China flip-flopped, slashed a 150-page draft document to 105 pages and threw it back at the Americans. The surprise came despite speculation that the rivals were nearing a trade deal. Instead, the achievements made during five months of marathon negotiations evaporated.

Vice Premier Liu is one of the party's 25 Politburo members and currently acts as the point man for economic policy. In charge of managing China's macroeconomic policies, he cannot devote his full attention to U.S. trade talks.

Commerce Minister Zhong Shan has been called on as a pinch-hitter of sorts as the Sino-American trade negotiations get back underway.   © Reuters

Zhong, who ranks lower in the party hierarchy as a Central Committee member, is expected to be Liu's proxy.

For minor issues, Liu will delegate negotiations to Zhong. This will make it possible for China to adopt a sustainable negotiating posture even if the talks drag on.

As the "core" of the party and its unrivaled leader, Xi cannot afford to allow his authority to be damaged.

Liu bore the brunt of criticism from disgruntled party members who said they would never allow him to conclude an "unequal treaty" with the U.S. It became difficult for Liu to push through a trade deal with the U.S., leading to the head-on collision in May.

Xi, who doubles as party chief, is preparing for a bitter political battle over personnel changes at the party's next national congress, in 2022. In the run-up, he wants to avoid being held responsible for failed negotiations with the U.S.

In this respect, Xi needs to be careful in Beidaihe. Among party elders, Jiang's presence remains strong.

Xi wants to avoid a complicated situation in which Jiang and other elders make demands regarding the stymied negotiations with the U.S, and having Zhong, a "second aide," by his side will strengthen his defense.

Some international media have portrayed Zhong as a tough negotiator and that his addition signals a hardening of China's stance toward the U.S.

But this analysis is somewhat one-sided considering Zhong's career as a regional bureaucrat. His job was to implement, not to set, agendas.

Zhong was born in Zhejiang. After working for a publicly owned textile company and elsewhere, he became the top official of the province's foreign trade and economic cooperation department at the end of the 1990s.

Later, Zhong served as Zhejiang's vice governor under Xi, who arrived in the province as its top official. This paved Zhong's way to Beijing.

When Xi became China's vice president in 2008, Zhong was promoted to vice commerce minister and followed a path toward acquiring expertise in international trade negotiations.

As a member of the Zhejiang faction, Zhong is in a position to directly report to and quickly seek decisions from Xi and Liu during negotiations with the U.S. But Zhong is a negotiator who moves following his superiors' wishes.

The first China International Import Expo in Shanghai last November did not have the effect that President Xi Jinping had intended.   © Reuters

The selection of Shanghai to host the latest round of talks gives clues to Beijing's strategies.

In late July, state-run China Central Television's main evening news program gave extensive coverage to the fact that there were 100 days to go before the opening of the second China International Import Expo on Nov. 5, also in Shanghai.

The big event was held for the first time in the same city last November, with Xi himself visiting.

The inaugural expo was meant to demonstrate that China was striving to cut its huge trade surplus by expanding imports from the U.S. and other countries.

But something opposite to Beijing's intentions happened. U.S.-China trade frictions intensified, and Washington imposed additional punitive import tariffs on Chinese products.

The fresh round of trade talks in Shanghai reflects China's desire to demonstrate efforts to expand imports again. The state-run Xinhua News Agency on Sunday reported that several million tons of U.S. soy beans were heading for China by ship.

Even if some kind of trade agreement is reached, it will take considerable time for China to actually implement various legal reforms and detailed rules being demanded by the U.S.

"After the agreement, it will take nearly two years to implement at the local level," said one Chinese source familiar with practical operations.

If that is the case, Trump will not be able to tout his accomplishments on China during the U.S. presidential election cycle, which is already beginning. The Democrats, adversaries to Trump's Republicans, held their second round of televised debates this week. Time has in effect run out, the source said.

Possibly aware of this, Trump has opened a new front and is attacking the World Trade Organization, claiming that it gives unnamed countries an advantage by treating them as developing economies.

Trump on Friday tweeted, "The WTO is BROKEN when the world's RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment. NO more!!!"

Trump ordered the Office of the U.S. Trade Representative to stop treating such countries as developing if the WTO makes no progress toward reform within 90 days.

While they are in Shanghai, Trade Representative Robert Lighthizer and other U.S. officials need only look at a cluster of skyscrapers in Shanghai's Pudong district to realize China is using subterfuge in its claim to be a developing country.

Shortly before this week's negotiations, Trump referred to the possibility of no agreement being reached before the U.S. presidential election in November 2020. He presented the view that China is dragging its feet in the negotiations, hoping that a Democrat replaces Trump in the White House.

Xi is also preparing for prolonged negotiations with the U.S. by reshuffling his negotiating team's lineup. He has his own reasons for doing this.

China's economic slowdown is making matters tense.

Katsuji Nakazawa is a Tokyo-based senior staff writer and editorial writer at Nikkei. He has spent seven years in China as a correspondent and later as China bureau chief. He is the 2014 recipient of the Vaughn-Ueda International Journalist prize for international reporting.

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