Source: Xinhua
The opinions expressed by authors in this commentary do not necessarily represent the views of the China Institute or the University of Alberta.
Originally announced in May 2017, the CIIE is similar in structure to the China Import and Export Fair (also known as the Canton Fair) in Guangzhou, which is China's oldest and largest trade exposition. In contrast to the Canton Fair's focus on both import and export trade, the CIIE is the world's first import-focused expo held at the national level. China is actively working to drive domestic demand for goods and services - a result of slowing external demand, the uncertain global trade environment, and a growing middle class. It has stated that it will grow imports of goods and services to US$30 trillion and US$10 trillion over the next 15 years, respectively. China's expected import growth provides foreign firms with a "historic opportunity" to enter a dynamic Chinese market, facilitated through events like the CIIE. The expo closed on November 10 after Chinese State Media reported that $57.83 billion worth of deals were signed. This includes roughly $16.46 billion in the intelligence and high end-equipment sector, $11.99 billion in the automobile sector, and agricultural products worth $12.68 billion.
Mr. Xi, who finds himself locked in a bitter dispute with U.S. President Donald Trump, appears to be "pressing the case to the rest of the world that China can be a positive force for global trade" by demonstrating wholehearted support for increased Chinese market access, economic fairness, and trade rebalancing.
Mr. Xi's speech, made to a crowd noticeably devoid of prominent Western political leaders, outlined China's commitment to "pursue a new-round of opening-up", widening market access to China, and supporting global free trade. The speech included a pledge to step up efforts towards opening-up the Chinese economy, via five main initiatives. This includes lower tariffs and reduced import obstacles, a promise to significantly increase China's importation of goods and services, the reduction of intellectual property rights infringements, and promoting international cooperation through multilateral institutions and economic partnerships.Mr. Xi's speech also provided a review of China's recent economic activity. China has faced a turbulent economic year, with cooling GDP growth, slowing factory output, and downward trending markets. Despite this, Mr. Xi stated that China's economy is performing "well within the reasonable range", as judged by the main economic indexes like GDP growth and job creation.
This sentiment was punctuated with a firm rebuke of the increasingly hostile global economic environment, calling for a transition away from the "law of the jungle and winner-takes-all" approach to expanding global development and trade - a stark contrast to recent U.S. trade policy. Mr. Xi's strong words were a plain reference to the Trump Administration's recent approach to trade. U.S. President Donald Trump has actively promoted protectionist trade policy via his "America First" agenda, placing broad tariffs on Chinese goods and accusing China of engaging in "numerous unfair policies and practices relating to United States technology and intellectual property." The subsequent China-U.S. "trade war" has led to more tariffs and a tense political impasse. Mr. Xi's public rejection of the Trumpian approach to free trade is nothing new, yet serves to reinforce the current divide between the world's two largest economies.
Mr. Xi spoke with relative candor and vowed that China would further embark on a series of efforts aimed at opening the Chinese economy to foreign players, promoting multilateral trade, and acting as a positive force in the global business environment. Critics, however, have raised questions over the address. Despite the inclusion of positive rhetoric and seemingly substantive pledges, as the Financial Times' Shanghai Bureau Chief Gabriel Wildau notes, it "was light on specifics and new commitments, and foreign executives and diplomats said they have grown wary of Mr. Xi's promises, arguing they remain vague and have been followed with few specific reforms on market access and intellectual property." Western firms operating in China have long complained of unfair treatment, including rampant intellectual property theft and difficulty in conducting business operations. China's lack of new and specific directives leaves many wondering if similar transgressions will continue to transpire.
China has taken some recent steps to reduce "red tape" and open its economy and financial markets to the world. This December marks 40 years since Deng Xiaoping began the process of rapid reform and "opening up" in the Chinese economy. This created a system with both free market ideals and strong government planning, transforming China into the world's second largest economy. China has acknowledged the "decisive" role of the market in resource allocation, a promising sign for the private sector and foreign firms. Building on the doctrine of mixed-ownership reform, China has indicated that would implement a negative list for market entry, open up its finance industry to foreign companies, and allow foreign stakeholders in Chinese state-owned firms. Foreign companies such as American Express and Standard Chartered were recently granted permission to operate in the Chinese market, and many others are currently seeking permission.
Foreign parties are, however, left wanting more. Ahead of the expo, the European Union, China's biggest trading partner, released a statement calling for China to engage in "specific ambitious regulatory and systemic opening" with a "clear-cut statement by the Chinese government which lays out details and timelines for such measures." The French and German Ambassadors to China echoed this sentiment via an op-ed in the business magazine Caixin, stating that European trust could be strengthened if China "showed genuine dedication to opening its markets further to investors from Europe" and that European companies are "looking forward" to China demonstrating that it will "not waver and will deepen its opening-up and reform policy." This sense of optimism seems short-lived, however. The European Union Chamber of Commerce in China, a group representing EU companies operating in Asia, expressed disappointment in Mr. Xi's pledges, "arguing that little of what the Chinese president promised in his much ballyhooed speech to open the inaugural Import Expo in Shanghai on Monday was new." Mr. Xi's speech, in the opinion of the Chamber, was light on details, lacking "concrete measures or timelines", and largely echoed the rhetoric espoused at the April 2018 Bo'ao Forum for Asia. This sentiment was echoed by the American Chamber of Commerce in Shanghai. China appears to be saying all the right things, yet has failed to commit to real, substantive policy changes.
China's current approach to economic policy has also appeared to impact the outlook of companies and investors in the domestic Chinese market. As stated in a recent Citigroup report, members of the Chinese business community "see government policies "turning left" in favor of state enterprises even as officials profess to "turn right" in support of private companies and further reform and opening up." Citibank reports that this "negative sentiment is hurting the most dynamic sector of the economy just as it grapples with the impact of a trade war with the U.S." Policy uncertainty appears to be the root cause of this negative sentiment - a noticeable parallel to Mr. Xi's rhetoric regarding international trade.
The CIIE provided China with a platform to express its support of free trade and an open world economy. This appears to directly contrast the rhetoric of Donald Trump's Administration. Mr. Xi appears to be taking a reasoned approach, yet skeptics are unsatisfied with the lack of concrete action and remain frustrated with the slow progress of China's economic reforms. Although China has taken some promising steps to increase market access for foreign firms, it's impossible to know if this will continue. Statements announcing new policy do not guarantee action will actually be taken, although the dialogue by Mr. Xi is an important step for any future progress. China's relationship with the world will continue to evolve amid global political uncertainty.