John Ruwitch, Winni Zhou
November 5, 2019 / 10:02 AM / Updated an hour ago
SHANGHAI (Reuters) – Global trade barriers must be removed, and countries should uphold basic multilateral trade principles while standing firm against protectionism, Chinese President Xi Jinping said on Tuesday.
Speaking at the opening of the Nov. 5-10 China International Import Expo, or CIIE, an annual import show in Shanghai, Xi said more must be done to boost international cooperation and remove barriers to innovation.
He reiterated broad pledges to continue to open China’s economy and markets, and strengthen protection of intellectual property rights.
The remarks come as U.S. and Chinese negotiators work to finalise a text of a “phase one” agreement for U.S. President Donald Trump and Xi to sign this month to ease the nearly 16-month trade war that has dented the global economy.
“There is no single country that can resolve by itself the difficulties facing the development of the world’s economy,” Xi said in a speech.
“We need to join hands with each other instead of letting go of each other’s hands. We need to tear down walls, not to erect walls. We need to stand firm against protectionism and unilateralism. We need to continually bring down trade barriers, optimise global value and supply chains and jointly foster market demand,” he said.
China launched the import expo last year as the China-U.S. trade war was heating up.
Critics say the week-long Chinese buying spree once a year does little to address structural concerns, including weak intellectual property protection, entry barriers and the lack of a level playing field for foreign businesses in China.
French President Emmanuel Macron, attending the expo, called on China to “consolidate” the opening up of its market.
“Much has been done in recent years with two revisions of the negative lists for foreign investment … important tariff reductions have been granted. We call for their consolidation and deepening,” Macron said in remarks that followed Xi’s.
“We need a greater openness of China and its domestic market,” he said, citing the agri-food sector.
“All French, German and European companies expect a lot of China’s promises here.”
‘WE WILL DELIVER’
Foreign governments and business groups have become sceptical of Chinese reform promises and have long warned that China would invite retaliation if it didn’t match the openness of its trading partners.
On Tuesday, Xi listed a handful of measures that he said China had taken since last year’s CIIE to open its markets, and took direct aim at criticism.
“This shows that we do honour our commitments,” he said. “And we will deliver on what we have promised.”
China would continue to push its strategy of innovation-driven growth, and foster new engines of growth, Xi said.
“China will throw open its arms, and provide more market opportunities, investment opportunities and growth opportunities for countries in the world, so we can share the growth together.”
Last year, more than 3,600 companies attended CIIE, agreeing to some $57.8 billion in deals.
The expo comes at a rocky time for the Chinese economy with domestic demand stubbornly weak, despite more than a year of growth boosting measures.
“China will better leverage the fundamental role of consumption, actively construct a more proactive domestic market to help provide support for Chinese economic development and expand the global economic growth,” Xi said.
Imports dropped 8.5% in September after a decline of 5.6% in August.
China’s third-quarter economic growth slowed more than expected to its weakest pace in almost three decades, with gross domestic product (GDP) rising just 6.0% year-on-year.
Additional reporting by Ben Blanchard in Beijing and David Stanway and Marine Pennetier in Shanghai; Editing by Shri Navaratnam
Source: Reuters “Chinese President Xi says need to bring down trade barriers”
Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.
Dhaka Tribune describes in its article “Bangladesh looking to make the most of US-China trade war” the switching of sourcing for labor-intensive products to Cambodia, Bangladesh and other developing countries and those countries’ shortage of skilled labor and infrastructures in grabbing the opportunities.
The artoc;e predicts reduction in foreign investment in China as such investment is moving to less developed Asian countries with lower labor costs. However, it fails to see just as it points out those countries lack skilled workers, let alone engineers and technicians and China’s abundance of them. Therefore, while foreign investment in labor-intensive production moved to those countries, investment in industries with higher technology will remain in China. As China focuses on development of high technology, China simply has no need for investment in low-tech labor-intensive industries..
There has been quite much description of China’s falling growth rate caused by the trade war. However, the slowdown has not been caused by the trade war. China’s transformation from export- and investment-geared growth to innovation-, creation- and consumption-led growth will normally give rise to a reduction in growth rate. The trade war accelerates the reduction but it also speed up the transformation to enable China to achieve economic growth with higher quality.
As China has switched to innovation- and creation-led economic growth, technological talent is now in high demand in China. Bloomberg’s June-16 article “China’s Slowdown Is Fraying Nerves” says that due to the high demand for talent caused by the switch, government has to issue a call to improve the ethics and conduct of the Chinese scientific community, telling affluent developed regions not to use big compensation packages and bidding wars to recruit talent, especially from China’s Rust Belt.
There is not only domestic but also international competition for talent due to the switch. SCMP says in its report “China’s top talent now wants to work for rising domestic tech stars, not big brand multinationals” on June 21, “Once upon a time, US corporations could cherry-pick top Chinese talent from American universities with the promise of large salaries, generous benefits and the chance to work at market-leading organisations.
“Today, China’s cutting-edge technology companies – often referred to as China Tech Corporation (CTC) – are the most sought-after employers among many Chinese students, who want more than just a cushy life.”
Comment by Chan Kai Yee on Dhaka Tribune’s article, full text of which can be viewed at https://www.dhakatribune.com/business/economy/2019/07/13/bangladesh-looking-to-make-the-most-of-us-china-trade-war.
South China Morning Post (SCMP) says in its report “Donald Trump pushed Xi Jinping to commit to buying US farm goods at G20, but Xi avoided firm pledge”:
US President Trump repeatedly pressed Chinese counterpart Xi to commit to purchasing US agricultural goods at G20 summit in Japan
Xi refused to make specific commitment, signalling a new and tougher stance towards trade talks from Beijing, which was previously happy to make purchases
It believes that China has hardened its attitude to maintain its dignity. I have repeatedly mentioned in my posts that China’s further reform to switch to innovation-, creation- and consumption-led economic growth is indispensable but such reform may cause labor-intensive industries for export to developed countries to move to countries with lower labor costs, resulting in massive unemployment of workers in those industries. That was why China had to conduct the reform gradually and slowly to reduce its short-term harm.
Now US trade war has made China conduct the reform much faster. Western media and officials predict that China would be in great trouble. However, such troubles are China has to experience due to its reform. The trade war only quickens the reform and makes Chinese people put the blame on the trade war instead of the reform.
Such being the case, Chinese leaders certainly want the trade war to play its role in full to facilitate China’s further reform. When the reform has almost completed, China will certainly conclude a deal with the US to put an end to the harm caused by the trade war. Maintaining good relations with the US is certainly important but the further reform is China’s first priority as without it China cannot maintain its high growth rate to attain its goals for the realization of China Dream.
Comment by Chan Kai Yee on SCMP’s report, full text of which can be viewed at https://www.scmp.com/economy/china-economy/article/3017899/donald-trump-pushed-xi-jinping-commit-buying-us-farm-goods.
In my previous post, I mentioned that Khrushchev had established his powerbase but not strong enough to avoid being forced to resign. That powerbase refers to the powerbase that enables him to remain in his position instead of that enables him to carry out the revolutionary reform that harmed strong vested interests.
Emperor Jiaqing of Qing Dynasty had sound powerbase established by his predecessors and supported by prevailing Confucianism. He was able to punish his father Emperor Qianlong’s favorite high official He Shen and confiscate all He’s assets. However, he was unable to overcome powerful official group’s resistance to his efforts to overcome rampant official corruption given rise by He Shen’s corrupt leadership. Nor could the two succeeding emperors Daoguang and Xianfeng
That was more than 150 years ago. What about CCP top leaders in the People’s Republic of China that Deng Xiaoping regarded as cores of CCP collective leadership?
Deng chose Jiang Zemin as his successor. He regarded Jiang as the core of the third generation of CCP collective leadership, but after Deng died in February 1997 Jiang’s position as the core was challenged by Politburo Standing Committee members Li Peng and Qiao Shi in mid 1997 before the 15th CCP National Congress. Jiang’s position as the core was ensured by powerful elder Bo Yibo. Jiang further strengthened his powerbase later with the development of the most powerful Shanghai faction in CCP. As a result, he was able to have written into CCP constitution his Three Represents that justify China’s development of private sector that was fiercely opposed as capitalism by lots of CCP dogmatists.
Jiang’s successor Hu Jintao set up and developed a large and powerful CYL (Communist Youth League) faction in his 10 years in power. Hu had filled CCP Central Committee and its Politburo with lots of his faction members and appointed them high official posts. However, he was unable to conduct the further reform and opening-up for the transformation from export- and investment-geared economic growth to innovation-, creation and consumption-led growth.
In spite of his top position and powerful faction, Hu was challenged by the conservative faction led by Bo Xilai. There was heated debate between reformists’ idea of further reform and conservatives’ Maoism. Hu had found Bo’s crime of corruption and taken Bo in custody to deprive conservatives of their leader but was unable to punish Bo. As a result, in September 2012, two months before the 18th CCP National Congress, Jiang Zemin had to come out from his retired home in Shanghai to Beijing to personally preside over an expanded Politburo meeting to make the decision to punish Bo severely.
Xi inherited a divided China from Hu Jintao. He would certainly be unable fight rampant corruption and rectify CCP to prevent it from collapse if China remained divided. How could Xi unite China and find some strong force to help him attain his goals?
Article by Chan Kai Yee
Reform and Opening-up Also a Revolution
The first generation of the communists in CCP, risked their lives to fight and win their revolution to take over state power. That was CCP’s first revolution. However, as CCP they conducted orthodox socialism at first after winning the revolution. It failed to attain its goal to make China rich and strong because orthodox socialism was not commensurate to the reality.
The second and later generations of communists led by Deng Xiaoping and other reformist communists conducted the reform and opening-up. That was also a revolution as the reformists had overcome fierce opposition from dogmatists to replace orthodox socialism with their socialism with Chinese characteristics that allows and even encourages the development of private sector. In doing so, they also took great risks as no one had ever tried to carry out such a revolution so that no one could be absolutely sure of success.
That was the first stage of the revolution for socialism with Chinese characteristics. It has been proved an unqualified success in making China prosperous, rich and strong through China’s first stage of reform and opening-up.
Dead End of China’s Economy
Chinese President Xi Jinping’s predecessor Hu Jintao saw that in spite of the success, the serious problem in China’s old model of economic development in pursuing of economic growth through increase in investment for producing more goods for export.
As the economy of developed countries has failed to grow due to 2007-2008 financial crisis caused by US subprime mortgage bubble and European sovereign debt crisis started from 2009 and as developing countries remained poor, China’s export market saturated. Local governments and lots of enterprises, however, kept on borrowing loans from banks to invest in excessive production capacity for export
Difficulties in Carrying out the Transformation
Worried by the problems of overcapacity and excessive debts resulting from pursuit of export- and investment-geared economic growth rate, Hu initiated the transformation from such pursuit of growth to that of innovation-, creation- and consumption-led economic growth.
Moreover, Hu’s Scientific Outlook on Development puts the people first so that his government encourages and helps workers to get higher wages, resulting in increase in labor costs and reduction of the competitive edge of China’s labor-intensive industries. Most of China’s exports are produced by those industries.
China’s current leader Xi Jinping applies Marxist theory on identifying and resolving the principal contradiction in the society in Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. According to the Thought, the principal contradiction in socialism with Chinese characteristics now is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life.
In resolving that principal contradiction, workers wages have to be further increased in order to satisfy people’s needs for a better life. That will further reduce the competitive edge of China’s labor-intensive industries; therefore, the transformation to innovation-, creation- and consumption-led economic growth is indispensable for the CCP to resolve the principal contradiction. The transformation is, in fact, a revolution too as it will bring about revolutionary change in China’s mode of economic development.
A revolution needs revolutionaries to carry out. CCP old generation fought bravely and made great sacrifice to carry out their revolution to take over state power. The younger one of the old generation strived hard to carry out the reform and opening-up also revolutionary in nature. Those old revolutionaries have mostly passed away. The very few remaining alive are very old unable to work for the CCP.
China needs a new generation of revolutionaries to conduct the transformation and attain its two-stage development goals. At the first stage China shall basically achieve modernization by 2035 while at the second stage China shall be built into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful by 2050.
Where are the revolutionaries to fight to attain such ambitious goals? Xi Jinping is a revolutionary, a true revolutionary able to carry out the revolution.
Article by Chan Kai Yee
As mentioned in my previous posts the concessions Trump asked China for: the reduction of trade deficit, equal treatment between foreign and Chinese enterprises, protection of intellectual property and decision of Chinese currency’s exchange rate by the market were the major content of Chinese President Xi Jinping’s predecessor Hu Jintao’s further reform and opening-up.
Hu had realized that China could no longer achieve economic growth with its old approaches of heavy investment to increase exports. First, the international market for China’s labor-intensive industries and products with low technology is saturated. Second, as CCP has raised workers’ living standards, their wages have been much increased to cause great reduction in the profit margins of China’s labor-intensive industries. China has to switch from export- and investment-geared economic growth to innovation-, creation- and consumption-led economic growth. The above-mentioned further reform and opening-up are indispensable for such a transformation.
China has to upgrade the technology of its labor-intensive enterprises. It has attained that goal in some enterprises but the workers unable to learn the technology have to be laid off to be replaced by employees with better education and skill.
Most of enterprises in labor-intensive industries are unable to upgrade their technology so that they have to move to areas with lower labor costs. They have to lay off their Chinese workers and employ local workers withe lower wages in the areas they have moved to so as to reduce their labor costs. There will be quite serious unemployment as a result.
The further reform, therefore, encountered serious opposition from the vested interests in those industries. The resulting unemployment problem also greatly worries the reformists.
Moreover, in order to urge enterprises, scientists, engineers and skillful workers to conduct innovation and creation, China has to treat state-owned, private and foreign enterprises equally to enable competition to force enterprises to improve. Xi knows that protectionism can only protect backward enterprises and cause them to lose the incentives for innovation and creation. However, that also encounters opposition from vested interests. Hu was unable to make progress in his further reform and opening up. Xi has also been unable to make progress fast enough due to the opposition and unemployment problem.
Under such circumstances, Trump’s trade war forces labor-intensive enterprises to upgrade or move to areas with lower labor costs. The misery of unemployment will be caused by Trump instead of the reform and opening-up
The introduction of competition with foreign enterprises and protection of intellectual property to satisfy Trump’s and other Western countries’ demand are what China has promised when its joined the WTO. Since China enjoys such treatment in Western countries, it certainly shall reciprocate. Chinese intellectuals are clever and hardworking. The pressure of competition will force them while the protection of intellectual property will encourage them to innovate and create.
Trump’s trade war provides Chinese President Xi Jinping with golden opportunity to speed up his further reform and opening-up. Xi certainly will delay the deal to end the trade war in order to keep the pressure until he has succeeded in moving abroad or upgrading labor-intensive industries, making Chinese enterprises accustomed to competition and have the urge for innovation and creation.
Article by Chan Kai Yee
Protectionism prevails in the US to protect US backward industries, especially its car industry. The US has to impose high tariffs to prevent foreign advanced cars from dominance of US car market.
Chinese leaders are wise. They know China cannot switch to innovation- and creation-led economic growth if it protects backward domestic enterprises. They know China has to draw in advanced foreign enterprises and products to force Chinese enterprises to conduct innovation and creation in order to win competition.
However, they met strong resistance from vested interests. The trade war has enabled Chinese President Xi Jinping to successfully carry out his further reform to further open up China to international competition.
That is the major benefits that China has already obtained due to US trade war attacks.
If there is a deal to end the trade war, it will benefit both China and the US, just as CNBC’s report “China would still have room to ‘maneuver around’ increased US tariffs, expert says” points out.
The report quotes Victor Gao of the Center for China and Globalization as saying, “The tariff war is not in China’s interest but it’s also not in U.S.’s interest. So the sooner the two governments put the trade war behind us, the better”.
Even without a deal, Trump will also get quite a lot of concessions China has given to EU and other Western countries.
1. China will not devalue its currency;
2. China will not force foreign enterprises to transfer its advanced technology to Chinese enterprises through join ventures. In fact, what China wants now is top technology that foreign enterprises are not willing to transfer. However, allowing foreign enterprises to establish wholly owned enterprises with top technology will enable Chinese staff to have contact with or even learn their top technology. Such opening up will benefit both China and Western countries.
3. Protection of intellectual property. China now needs the protection of lots of the intellectual property developed by China on its own. To have others protect its intellectual property China certainly has to protect others’ intellectual property.
4. Removal of barriers that hinder others’ access to Chinese market. China has to do so if it wants access to others’ markets. Moreover, drawing in other nations’ popular products may urge Chinese enterprises to conduct research and development to produce equivalent and even better products.
China’s exports to the US are mainly products of labor-intensive industries that China will move to developing countries through BRI so that in the long run China will not suffer from US tariff hikes. China can easily find alternative source for its major imports of US agricultural products. Russia’s vast virgin land can provide lots of soybeans that can be grown on virgin land and may turn virgin land into good farm land for the production of other agricultural products to compete with the US. US trade war attacks will benefit not only China but also Russia.
Comment by Chan Kai Yee on CNBC’s report, full text of which can be viewed at https://www.cnbc.com/amp/2019/05/07/china-still-has-room-to-maneuver-around-us-tariff-threats-expert.html.