BEIJING — When Zhong Shan was running the Zhejiang Garment Import and Export Group in 1992, sending socks and gloves into the outside world, he caused a “nationwide sensation” with his “bold reforms.”
He wanted them to help the company cast off its inflexible ways of doing business. He held multiple staff meetings to convince workers, and eventually investors including state-owned banks, to buy shares in the company. Zhejiang Garment became the first state-owned trading company in China to have multiple owners.
The idea was unprecedented and “caused waves in the peaceful lake” of industrial China, according to an official provincial newspaper.
The company flourished. Within three years, Zhejiang’s state-owned enterprises accounted for almost half the province’s foreign trade and were the most profitable in the country. Reporters who trailed him around trade fairs complained that he walked so fast, they couldn’t keep up.
Zhong is now causing different kinds of complaints. And this time, they’re emanating from Washington.
The commerce minister has been catapulted into the negotiations to end the trade war between China and the United States. He was at the Group of 20 meeting in Japan last month and on a phone call with U.S. Trade Representative Robert E. Lighthizer this month.
Some officials in Washington view him as a hard-liner and see his sudden prominence in the talks as a sign that President Xi Jinping is preparing to take an even harder line in the protracted trade war.
Trump has been hoping that China’s economic slowdown will put pressure on Xi to cut a deal to end the trade war.
Indeed, official statistics published Monday showed that growth in the world’s second-largest economy has decelerated to the slowest rate in 27 years, partly because of the trade war. The annual growth rate slowed to 6.2 percent in the three months to the end of June, down from 6.4 percent the previous quarter, the National Bureau of Statistics said. This is within the 6 to 6.5 percent band the government has set for this year and was in line with market expectations of a gradual slowdown, but it is still China’s lowest growth rate since records began in March 1992.
China’s export figures were particularly bad. Exports to the United States fell by 8.2 percent in the latest three months, with the bulk of the drop coming after tariffs on $200 billion worth of Chinese exports rose from 10 percent to 25 percent in May.
Trump seized on the numbers as a sign that his tariffs were making “thousands of companies” leave China for other countries. “This is why China wants to make a deal.... with the U.S., and wishes it had not broken the original deal in the first place,” the president wrote Monday on Twitter. “In the meantime, we are receiving Billions of Dollars in Tariffs from China, with possibly much more to come.”
But in Beijing, there are signs that Xi and the ruling Communist Party are in no particular rush to cut a deal. Indeed, Chinese policymakers routinely ask American interlocutors what they think is Trump’s internal deadline for making a deal, knowing that he has his reelection campaign to consider next year.
Xi is in no such hurry. Not only does he not have to worry about elections, he’s done away with term limits, so he can theoretically rule indefinitely.
Plus, while the party doesn’t have the same financial arsenal as during the 2008 global financial crisis, it can still provide enough stimulus to the economy to ensure that the slowdown is gradual.
Into this mix came Zhong, the commerce minister.
The “U.S.-caused trade war” is “typical unilateralism and protectionism,” Zhong is quoted as saying in an interview with the People’s Daily, the mouthpiece of the Communist Party of China, published Monday.
“We have to uphold our warrior spirit in firmly defending national and people’s interests and in defending the multilateral trading system,” he is quoted as saying.
Until now, China’s chief trade negotiator has been Liu He, the vice premier in charge of the economy, who studied at Harvard and has a long history of dealing with American officials. But he is a policymaker, not someone who has been involved in the nitty-gritty of trade talks.
Zhong’s arrival has led to speculation that Liu has been sidelined. But Andy Rothman, an investment strategist who’s spent more than 20 years analyzing China, said he didn’t think that was the case. “I don’t read this in a negative way — they are just reinforcing their team,” he said. “Any time I ask Chinese people about Xi losing faith in Liu He, they just laugh because they don’t believe Xi has lost faith in Liu.”
After Zhong suddenly joined trade talks in Japan and then the phone call between negotiators, Gao Feng, the ministry’s spokesman, said it was “quite normal” for the minister to join the talks since his ministry is in charge of the negotiations.
Some in Beijing think Americans are at least partly right to conclude that Zhong is being brought in to fight China’s corner more forcefully — but not necessarily because he’s more hard-line.
“By parachuting the minister of commerce into the scene, China is trying to tell the U.S. that we mean business more than ever,” said Yao Xinchao, a professor of trade at the University of International Business and Economics in Beijing.
Zhong has more expertise in trade and a bigger say in decision-making than Vice Minister Wang Shouwen, who had been involved in the talks, Yao said. “At this point, it’s hard to tell if Zhong would be more hard-line than Wang, but he is definitely more authoritative and more adept at getting things done,” he said.
James McGregor, chairman of the greater China region for APCO Worldwide, a business consultancy, agreed that Zhong is not necessarily more hard-line but is more experienced in trade negotiations.
“They’re bringing in a professional. Xi has Liu He, who is a policy person, not a trade negotiator, and he’s up against Lighthizer, who’s a shark,” McGregor said. “Lighthizer is doing these trade negotiations like he’s a Washington, D.C., trade lawyer, making sure the language leaves no wiggle room.”
Certainly, Zhong has much more experience in the trenches than Liu. He even edited a book on Chinese companies that had been accused of Section 337 violations, or unfair methods of competition, in the United States. The book analyzed the cases of Chinese companies that were investigated, explaining how the system works and giving advice on how to avoid and deal with such charges.
After overhauling the garment company and moving into government jobs, Zhong became deputy governor of Zhejiang province in 2003.
In that role, he crossed paths with someone who would go on to become very important for China: a certain Xi Jinping, chairman of the standing committee of the Zhejiang Provincial People’s Congress. Two years later, Zhong accompanied Xi on a visit to Hong Kong to promote cooperation between the province and the Chinese territory.
By 2009, Xi was vice president and Zhong was vice minister of commerce. In that role, Zhong wrote an editorial for the People’s Daily arguing that China’s rising dependence on foreign trade was an inevitable result of globalization and would “not necessarily lead to economic risks.” He called for “calmness and vigilance” in handling trade frictions.
Four years later, Xi became president of China. Zhong, too, moved up the Communist Party ladder. He became a top trade official in the central government and then, at the beginning of 2017, was promoted to commerce minister.
Regardless of whether it’s Liu or Zhong who’s running the negotiations, it’s clear who’s running the show.
“Of course Xi wants to get more directly involved in the decision-making [during the trade talks],” said Yao, the Beijing professor. “You can never underestimate the breadth and depth of the top leadership’s participation in major issues. In China, the big boss always gets the final say.”
Lyric Li and Wang Yuan contributed to this article.
