Amid Trade War With U.S., There Are Signs Of Dissent Among China's Economists Sheng Hong of the Beijing-based Unirule Institute of Economics is one who has dared to speak up. Now authorities have shut down his think tank and he's been prevented from traveling abroad.

Amid Trade War With U.S., There Are Signs Of Dissent Among China's Economists

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President Trump meets China's leader, Xi Jinping, at the G-20 summit in Argentina tomorrow. The two will, obviously, have a lot to discuss - in particular, the trade war that doesn't seem to have an end in sight. As NPR's Rob Schmitz reports, pressure inside China is mounting over Xi's response and how he has managed relations with the U.S.

ROB SCHMITZ, BYLINE: On the day he became leader, Xi Jinping gave a speech about his dream for China.


PRESIDENT XI JINPING: (Speaking Chinese).

SCHMITZ: "To achieve this dream," he said, "we must take a Chinese path - a path forged by decades of communist rule and thousands of years of Chinese civilization." A path, says economist Sheng Hong, which has led China into a trade war with the United States.

HONG SHENG: (Through interpreter) This trade war is not between China and the U.S. It's a war between China's most powerful political interest group on one side while the U.S. and the people of China are on the other. If China yields to the U.S. request for fair trade, this will be good for all Chinese.

SCHMITZ: Sheng heads the Unirule Institute of Economics in Beijing. He says China seems to have abandoned the decades-old policy of reforming its markets and opening up trade in favor of a new so-called China model of state capitalism dominated by China's state-owned enterprises - a model, he says, that's incompatible with fair trade and is damaging China's economy.

SHENG: (Through interpreter) The China model assumes economic growth is due to government control. This is not in line with the facts. One hundred percent of Chinese companies were owned by the state in 1978, and our economy was terrible. As the state gave up market control to the private sector, our economy grew. We must keep doing that.

SCHMITZ: That's why Sheng and other prominent intellectuals in China have sacrificed their careers to publicly criticize their government's handling of trade negotiations with President Trump. They argue that what Trump is asking for - opening China's markets to the private sector and eliminating unfair competition from state-run companies - will not only be good for U.S. companies but also for Chinese people because China's private sector employs three times more people than its state-run sector. And it accounts for most of China's economic growth. But Xi Jinping has dug in his heels. China's economy continues to outpace much of the world. And he has continued to promote the state-heavy China model.

ARTHUR KROEBER: Xi has kind of painted himself into a corner.

SCHMITZ: Arthur Kroeber is author of "China's Economy: What Everyone Needs To Know."

KROEBER: He's sort of, like, said, OK. We have this China model. It's doing its own thing. China needs to become this great power. He can't back down from that.

SCHMITZ: Kroeber says this style of leadership is a departure from former Chinese leader Deng Xiaoping, whose credo of dealing with the outside world was hide your strength and bide your time.

KROEBER: The genius of the Deng Xiaoping hide and bide strategy is that it gives you a lot of freedom of movement. You have not committed yourself to anything specific that it would be difficult to back down from.

SCHMITZ: Kroeber says the problem with Xi Jinping's assertive style is that when he's challenged, as he is now by Trump, he has to stand his ground. And that can become costly. Sheng Hong says this stance also leads to an inability to listen to criticism, like his. Last month, Sheng was about to get on a plane to Boston where he was going to give a talk at Harvard.

SHENG: (Through interpreter) Police stopped me at the airport. They said if I left China, it would threaten state security. I was shocked.

SCHMITZ: A week after I spoke to Sheng, authorities shut down his economic institute. He says Beijing's inability to listen to criticism from within is like riding in a car with a filthy windshield, speeding ahead without seeing the road while enjoying the beautiful views out the side windows. At some point, says Sheng, you're bound to crash. Rob Schmitz, NPR News, Beijing.

[POST-BROADCAST CORRECTION: In the audio of this story, as in a previous Web version, we incorrectly say that the authorities in China shut down the Unirule Institute of Economics. The think tank opted to close after its affiliate was shut down.]

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