BEIJING - Chinese President Xi Jinping reiterated pledges to open sectors from banking to auto manufacturing in a speech that also warned against returning to a “Cold War mentality” amid trade disputes with U.S. counterpart Donald Trump.
Xi pledged a “new phase of opening up” in his keynote address Tuesday to the Boao Forum for Asia, China’s answer to Davos. While the speech offered little new policy, Xi affirmed or expanded on proposals to increase imports, lower foreign-ownership limits on manufacturing and expand protection to intellectual property -- all central issues in Trump’s trade gripes.
“Human society is facing a major choice to open or close, to go forward or backward,” Xi told hundreds of investors gathered on the resort island of Hainan, in a speech that didn’t mention Trump’s name. “In today’s world, the trend of peace and cooperation is moving forward and the Cold War mentality and zero-sum-game thinking are outdated.”
The long-planned speech -- marking 40 years after the first economic reforms transformed China -- was being closely watched after Trump’s plan to hit hundreds of Chinese products with duties. The country faces a credibility gap after years of promises to free up the economy were followed by more centralized control, market-access barriers and state support for local companies.
Those practices are at the center of Trump’s threats to levy some $150 billion of tariffs against China. The U.S. has asked the country to reduce its trade surplus by $100 billion, cut tariffs on cars and stop forced technology transfers by foreign corporations, among other things.
Xi’s conciliatory tone helped bring risk appetite back to Asian markets. Shares from Sydney to Hong Kong rose alongside oil and metals and Treasuries extended declines with gold and the yen.
A White House official who watched a broadcast of Xi’s speech said the Chinese president’s reference to autos following Trump’s Twitter complaints about the issue appeared to be an opportunity to develop trust between the two sides. The official said that the U.S. was expecting China to put concrete proposals forward.
What our economists say...
“The U.S. side will likely want to see deeds, not just words, before it considers softening its protectionist stance,” Bloomberg Economics Chief Asia Economist Tom Orlik wrote in a note. “Even so, with Xi’s speech positioning China as conciliatory, the chances of a damaging trade war appear a shade lower.”
The speech was attended by leaders including Philippine President Rodrigo Duterte, Singaporean Prime Minister Lee Hsien Loong, and International Monetary Fund Managing Director Christine Lagarde.
“I read much of that speech as being about cementing China’s regional leadership as an open country fostering free trade and development,” Jim McCaughan, chief executive officer at Principal Global Investors, told Bloomberg Television. “The idea that there is going to be a quick fix on this is unlikely.”
Since Trump’s election, Xi has presented himself as a champion of the existing global trading system, comparing protectionism to “locking yourself in a dark room” during a speech last year at the World Economic Forum in Davos, Switzerland. On Tuesday, he took a veiled swipe at Trump’s “America First” polices.
“Paying attention only to one’s own community without thinking of others can only lead into a wall,” Xi said. “And we can only achieve win-win results by insisting on peaceful development and working together.”
Federal Reserve Bank of Dallas President Robert Kaplan said Tuesday that trade issues between the U.S. and China won’t get resolved soon and warned of potential damage if the dispute is prolonged.
“I really do think it is too early to judge how this is going to affect the economy,” Kaplan said on Bloomberg Television from Beijing. “But I do think the rhetoric, if it goes on for long enough at this level, is having somewhat a chilling effect.”