China’s next economic czar: Harvard trained Xi adviser

FILE: Flag of the People’s Republic of China (PNA photo)

BEIJING – China’s next economy czar is a Harvard-trained supporter of free markets who is President Xi Jinping’s top adviser but has no experience fighting the bureaucratic battles the post can require.

Liu He’s rise comes as the ruling Communist Party faces mounting pressure to make its cooling, state-dominated economy more productive. That will require politically fraught changes to open industries wider to private and foreign competition.

On Monday, the 66-year-old Liu was named one of four vice-premiers by China’s ceremonial legislature. No details of his duties were immediately announced but he is widely expected to have broad economic powers.

As a vice-premier, Liu would answer to Premier Li Keqiang, whose post traditionally is top economic official. But Xi, China’s most dominant figure since the 1980s, has stripped Li of many of his job’s most prominent duties by appointing himself head of the ruling Communist Party’s body overseeing economic reform.

Dubbed China’s “economic mastermind” by Hong Kong newspapers, the silver-haired Liu is making a late-career change to a politically challenging role carrying out plans after two decades designing them. He is close to Xi, China’s most dominant figure since the 1970s, but unlike previous reformers-in-chief has no background in industry or as a mayor or provincial governor.

“He might be able to design the right policy. However, getting people to implement it, especially at the local level, might be a challenge,” said Hongyi Lai, a specialist in Chinese politics at Britain’s University of Nottingham, ahead of Monday’s announcement.

“If someone is disobedient, he may draw on Xi’s power to push through the policy,” said Lai. “But I would say that cannot be used on a daily basis.”

A member of the party’s 25-member Politburo, Liu already is in charge of a Cabinet agency created in November to oversee financial reform, monetary and industrial policy and regulatory changes.

Liu made his debut on the global stage with a speech in January at the World Economic Forum in Switzerland on a program that included U.S. President Donald Trump and German Chancellor Angela Merkel.

People who have met him say Liu is fluent in colloquial English and talks candidly about the need to change state-owned industry, as well as the resistance that might face. He has told foreign businesspeople he favours free markets and disagrees with plans for state-led development of industries from electric cars to robots to biotech.

“There is a sense of urgency among Xi’s people, including Liu He, that reforms have lagged behind,” said Dali Yang, a University of Chicago political scientist.

Reform advocates are hoping that after spending his first five years in office amassing power, Xi will accelerate what they complain has been sluggish action on carrying out an ambitious agenda announced by the party in 2013. It called for giving markets the “decisive role” and opening industries wider to private business.

Xi has sent mixed signals by affirming plans to build up state companies that dominate fields from energy to banking to telecoms.

Foreign companies complain that even when Beijing promises to open finance and other industries, it fails to follow through or imposes unappealing conditions such as ownership limits or a requirement to hand over technology.

“Companies are getting very tired of promises,” said Jake Parker, vice-president for China operations of the U.S.-China Business Council. “They want to see action.”

Previous top economic officials had more bureaucratic experience.

Former Premier Zhu Rongji, who openly feuded with state company bosses and local officials during a painful industry overhaul in 1998-2003, was a former mayor and party secretary of Shanghai. Wu Yi had a career in the state-owned oil industry before she helped negotiate China’s entry into the World Trade Organization and ran finance policy as a vice-premier in 2003-08.

Liu’s experience is in the halls of power in Beijing, an asset at a time when Xi has gathered decision-making powers to the party centre.

Liu has been part of the policymaking inner circle since the 1990s, helping to craft the party’s five-year development plans. He was named a vice minister of the party’s economic leading group in 2003 under Xi’s predecessor, Hu Jintao, and is a vice chairman of the Cabinet’s planning agency.

Liu was among millions of urban young people who were sent to the countryside during the 1966-76 Cultural Revolution, the ultra-radical upheaval launched by then-leader Mao Zedong.

In 1972, Liu joined the party’s military wing, the People’s Liberation Army, where he served in an anti-aircraft regiment, according to the official Xinhua News Agency. He earned a master’s degree in economics from the party’s Renmin University and a second in public administration in 1995 from Harvard University’s John F. Kennedy School of Government.

In 2014, Liu was awarded China’s top economics prize for a research paper that compared the causes and outcomes of the 1930s depression and the 2008 financial crisis.

Among its conclusions: “Seek the widest intersection between Chinese and global interests.”

Another calls for avoiding conflict abroad – a position at odds with Xi’s ambitions for global influence and confrontational stance toward Japan, South Korea and Vietnam over territorial disputes.

“We should always warn ourselves not to be easily embroiled in international conflicts,” Liu wrote. “Instead, we should focus on really important matters to substantially improve our domestic conditions.”

Even as a vice-premier, Liu still would be carrying out plans made by the party leadership as a whole.

“You have to respect the fact that state-owned enterprises continue to be significant assets for the political system,” said Yang. “He needs to be fairly careful.”