President Xi Jinping offered to further open up China’s markets to foreign business, though fell short of proposing the thoroughgoing changes the Trump administration says it is seeking to avert a trade fight.
In a speech Tuesday that Chinese officials billed as packed with major policy initiatives, Mr. Xi promised increased imports, accelerated access to China’s insurance and other financial sectors, greater protections for intellectual property, and lower tariffs and reduced ownership restrictions for foreign car makers.
While Mr. Xi didn’t mention President Donald Trump or the trade friction with the U.S. once in his 40-minute speech, his proposals offered an olive branch to Washington, addressing some of the persistent criticisms leveled at Beijing by the Trump administration.
Markets surged following the remarks. The Dow Jones Industrial Average rose 369 points, or 1.5%, to 24348, and the S&P 500 climbed 1.3%.
Mr. Xi’s initiatives, however, included some previously offered policy changes, left out a definite timetable for action and skirted core complaints by the U.S. about China’s industrial policies that the White House says favor domestic companies and force the transfer of U.S. technology.
Overall, Mr. Xi’s address to political and business leaders attending a government-backed conference signaled that any market opening will be gradual, with Beijing keeping a heavy hand in managing the process.
“While we’re crossing the river by feeling the stones, we’re also strengthening top-level planning,” Mr. Xi told the annual Boao Forum on China’s tropical island province of Hainan.
Business executives and policy analysts described Mr. Xi’s offers as at best a missed opportunity to tamp down U.S. criticism and at worst likely to be read as the kind of holding action the Trump administration says Beijing has long used to defer substantive concessions.
“This speech was about modestly expanding market access, not constraining industry policy,” said Scott Kennedy, a deputy director at the Center for Strategic and International Studies, a Washington think tank. “I expect the Trump administration to criticize the speech as too little, too slow.”
The U.S. has in recent months imposed some limited penalties on imports of Chinese steel, aluminum and other goods and threatened tariffs on $150 billion worth of other Chinese products to reduce a $375 billion trade deficit with China. Beijing has mirrored those actions and threatened stern measure-for-measure retaliation. Prospects for an outright trade war between the world’s largest economies have rattled global markets, and Chinese officials have said in recent days that current tensions and rhetoric preclude negotiations.
Ultimately, Beijing is aiming for a negotiated settlement to the disputes, Chinese officials and analysts said—something that Trump administration say it wants too.
“China has shown its muscle,” said Chen Deming, former Chinese Commerce Minister while attending the Boao Forum. “But at the end of the day, both sides will have to sit down and talk.”
A question, some analysts said, is whether Mr. Xi’s speech provides any opening—or whether he is taking a hard line to wait out the U.S.
For some analysts and economists inside and outside China, Mr. Xi’s remarks are further proof that when Beijing talks of reform today, it doesn’t mean economic liberalization of the 1980s and 1990s, when the leadership closed legions of state plants, laying off tens of thousands, to prepare for an influx of foreign capital. Rather, reform today means continued fine-tuning of a government-led model.
“President Xi’s remarks do not represent a dramatic departure from existing Chinese policy, but rather a reiteration of the same themes Xi has promoted throughout his tenure,” said Zhu Chaoping, a Shanghai-based global market strategist at J.P. Morgan Asset Management. That means China “will gradually open up at its own pace and in the manner the government believes is most suited for China.”
Mr. Xi is an avowed nationalist, who believes in the Communist Party’s right to rule, according to Chinese officials and analysts. Mr. Xi has sought to bulk up state-run companies and kept China’s internet isolated behind its Great Firewall. He’s cultivated an image through state media as a strong leader who won’t cave in to foreign pressure.
Beijing is increasingly confident in shielding the economy from too big of a shock from a trade fight with the U.S. Chinese officials and government advisers attending the Boao Forum touted the country’s reduced reliance on trade to bolster growth, even though robust overseas orders kept China’s economic expansion on track last year. They also noted that China doesn’t finance much of its investment with foreign debts, which should shield the economy if foreign investors decide to pull out.
“At most, China would suffer some loss of fortune, but not a whole lot,” said Li Yang, chairman of the National Institution for Finance and Development, a Beijing think tank.
Still, President Xi has reasons to prevent an escalation in trade frictions with the U.S. The Trump administration’s threats of trade and investment penalties could affect other Xi priorities. While the Chinese economy roared ahead last year, government efforts to rein in debt, clean up the environment and reduce poverty are dragging on growth.
President Trump has taken particular aim at a central Xi initiative to upgrade China’s manufacturing sector to dominate frontier sectors like biomedicine, clean cars, semiconductors and aerospace. Trump administration officials have said those policies force American companies to transfer technology and allow cyberthieves to obtain proprietary information.
To those criticisms, Mr. Xi’s remarks offered little encouragement beyond much-repeated promises to bolster protections of intellectual property. While the speech touched on the concerns of U.S. companies, Jacob Parker, vice president of China operations at the U.S.-China Business Council, said it “falls short of offering paradigm-shifting announcements on ending joint-venture and licensing requirements that give China leverage to force technology transfer for market access.”
China’s actions so far “have greatly undermined the optimism of the U.S. business community,” Mr. Parker said. “Ultimately, U.S. industry will be looking for implementation of long-stalled economic reforms.”
Source: Wall Street Journal April 11, 2018 | By Lingling Wei