Chinese Minister Takes Aim at Trump's Policies

Chinese Finance Minister Lou Jiwei called GOP presidential front-runner Donald Trump an "irrational type" and said the U.S. "wouldn't be entitled to world leadership" if it followed Mr. Trump's proposed trade policies toward China.

Mr. Trump has advocated imposing up to 45% tariffs on China as a way to force it to change its trade policies. Mr. Lou, known in China for his bluff outspokenness, said in an interview with The Wall Street Journal that such a tariff would violate World Trade Organization rules. Under those conditions, he said, the U.S. wouldn't be entitled to its position as the world's major power.

Mr. Lou is correct on the trade rules, according to Jeffrey Schott, a trade economist at the Peterson Institute for International Economics, a think tank backing free trade.

"Almost any across-the-board tariff increase would violate U.S. obligations under the WTO," he said.

In a statement from his campaign, Mr. Trump charged that China was "in total violation of WTO regulations" and that the U.S. "has incompetently allowed them to get away with this" and has failed to impose "equal or greater taxes and tariffs" on China. If he is elected president, Mr. Trump said, China "will learn to deal fairly and justly or we will not deal at all" with Beijing.

In a Trump presidency, he added, "all trade and other agreements will be totally and completely renegotiated" so the U.S. will become a "beneficiary of trade, and we will no longer be thought of as fools."

Asked about the tough talk on China in the presidential campaign, from both Democrats and Republicans, Mr. Lou said Americans needed to recognize the U.S. and China "are mutually dependent on each other" and both have a lot to lose in any economic confrontation. "Our economic cycles are intertwined," he said. "We have more in common than sets us apart."

Mr. Lou also said he understood that rhetoric in a presidential campaign gets heated and often doesn't reflect the policies an incoming administration would adopt. With a new administration, he said, "U.S.-China ties should be more or less as they are now."

Mr. Lou is the most senior Chinese official to comment on Mr. Trump. In March, Chinese Premier Li Keqiang was asked about the U.S. election -- though not Mr. Trump specifically -- and said it was "lively and caught the eyes of many." In daily briefings, the foreign ministry declines to answer questions about the New York businessman or other U.S. presidential candidates.

China this year leads the Group of 20, whose finance ministers met on Friday on the sidelines of the International Monetary Fund's spring meetings held throughout the weekend in Washington. Many participants welcomed signs of stabilization in the Chinese economy. But they also raised concerns that China's authorities haven't been carrying out economic overhauls as fast as necessary, potentially leading to other problems down the road.

Mr. Lou, who co-chaired the G-20 meeting of finance ministers, urged patience from the rest of the world. "In China, there are big distortions in our economic system," he said.

The Chinese finance minister urged the U.S. to increase its public and private investment as a way to improve the U.S. economy and make a contribution to global economic growth. He argued China had done its part in 2009 during the global financial crisis by putting in place a large stimulus program. That spending, he argued, helped buck up global growth.

"China's efforts helped the world," he said. "Now the U.S. needs to do more to help the world" through increased investment. He said he has been lobbying the U.S. to take such action, "but we haven't seen much progress."

He urged the U.S. to move more briskly in deregulation -- the same advice the U.S. has been giving China for years -- and cited burdensome rules holding back construction projects in the U.S.

U.S. Treasury Secretary Jack Lew said the U.S. government has long played an important role in bolstering the domestic and global economy. "When the government needed to step in during the [global financial] crisis, we stepped in," he told reporters Friday. "When it was time to step out, we stepped out. Some could argue we should have stayed in a little bit longer, it should have been a little bit bigger or a little bit smaller. But basically we used all of the tools."

Many in China argue that its stimulus program went on for too long and produced an avalanche of lending by state banks, which inflated a bubble in China's real-estate market and led to vast overcapacity in its industrial sector. Now the real-estate bubble has burst and the lending has saddled China with poorly performing companies that are having a tough time paying down their debts. Largely as a result, China's economy has slowed to below 7% annual growth in GDP, about half the 14.2% GDP growth it recorded in 2007.

China has just begun to deleverage, Mr. Lou said, and can't produce the demand for commodities that many emerging markets had relied upon. That has depressed commodity prices and reduced growth prospects for mineral and oil producers in Asia, Latin America and Africa.

The G-20 issued a joint statement urging greater use of fiscal measures, alongside monetary policy and underlying economic overhauls, to boost world growth. The countries also forswore protectionism and the use of foreign-exchange policy "for competitive purposes." The G-20 has urged such policies for years. The leaders of the G-20 will meet in September in Hangzhou, China.

Mr. Lou pointed to experiments in land reform as examples showing that China is making progress. In China, land is owned by the state, so farmers can't sell the properties they have farmed. That has kept many tethered to the land and produced an inefficient agricultural system of tiny plots of land.

In the experiment, he said, farmers would be encouraged to transfer and lease out the land or use it for equity financing.

Mr. Lou has also been pushing local governments to clean up their debt. "I'm a man of principle," he said, "but I'm also pragmatic."