Xi Jinping to outline economic reforms amid trade tension

Trump trade tariffs limit room for manoeuvre as hardliners argue against change

Xi Jinping will on Tuesday give the most anticipated speech of his already historic presidency at the Bo’ao Forum for Asia. Photograph: Reuters

Xi Jinping will on Tuesday give the most anticipated speech of his already historic presidency at the Bo’ao Forum for Asia. Photograph: Reuters

 

Xi Jinping will on Tuesday give the most anticipated speech of his already historic presidency. During an address to a Chinese government-hosted forum on Hainan island, Mr Xi’s challenge will be to outline bold new economic reforms and measures to open markets without appearing to bend to US pressure on trade.

With China preparing to mark the 40th anniversary of Deng Xiaoping’s “reform and opening” policies, Mr Xi had hoped to use his address at the Bo’ao Forum for Asia to signal his determination to be as decisive and effective as Deng was in implementing difficult economic and financial reforms.

Last week’s trade hostilities, however, have bolstered the position of hardliners, who argue against making any trade or market-opening concessions to the US.

“It’s very delicate,” said one Chinese government policy adviser. “We don’t want to escalate the situation, but if we don’t respond we only encourage Trump.” On Sunday, US President Donald Trump tweeted: “China will take down its Trade Barriers because it is the right thing to do …A deal will be made on [trade].”

Mr Xi has also limited his room for manoeuvre by cultivating an image of a nationalist hero in the mould of Mao Zedong, Communist China’s revolutionary founder.

In two major speeches over the past six months, Mr Xi has outlined his vision for China’s emergence as a first-rank global power. In the most recent of these addresses - at last month’s annual session of China’s rubber-stamp parliament - Mr Xi warned the US not to “threaten others”.

It was a warning that Mr Trump chose to ignore in what Chinese officials saw as deliberately insulting fashion.

On April 5 Mr Trump threatened “$100bn in additional tariffs” on Chinese exports to the US. Just a day earlier the Trump administration had outlined its plans to assess punitive tariffs on $50bn worth of Chinese exports, to which Beijing responded in kind. Mr Trump dismissed China’s counter-tariffs, which officials in Beijing described as proportionate and legal, as “unfair retaliation” that will “harm our farmers and manufacturers”.

Mr Trump’s latest threat, issued via a formal White House statement rather than a casual tweet, has raised the stakes dramatically for Mr Xi as he prepares to address hundreds of Chinese and international dignitaries, financiers and captains of industry at Bo’ao.

“Xi is up against a wily adversary,” says Tim Clissold, a foreign investment adviser and veteran of hundreds of Chinese business negotiations. “Trump is unpredictable and [has] hidden goals.”

In private, Chinese officials are more sanguine. “Trump is unpredictable in one sense but he’s very predictable in another sense,” one official told the Financial Times. “He has been a protectionist his whole life.”

In a hastily arranged press conference held just before US markets opened on Friday morning, a Chinese commerce ministry spokesman vowed that “under this backdrop [of US threats] China will not negotiate”.

“Trump has moved further in the wrong direction,” said He Weiwen, a Chinese trade policy expert and former commerce ministry official. “The right approach is to sit down for negotiations without unilateral threats, based on hard facts and World Trade Organisation rules.”

While Mr He added that China would continue to retaliate in kind against any further trade actions launched by the US, he believes that Mr Xi will not waver from the principled rhetoric of his speech last year at Davos in defence of free trade and rules-based institutions such as the WTO.

“President Xi will speak explicitly for free trade,” he said. “Trump’s protectionist policies will be a short wave in the long history of world trade.”

Just days after Mr Xi’s speech at Davos, Mr Trump declared the beginning of a new “America first” era at his inauguration. This week it is Mr Xi’s turn to respond to Mr Trump as the Chinese president again seeks to present himself as both a responsible international statesman and a bold reformer, but also one who will not be pushed around. – Copyright The Financial Times Limited 2018