Business / Economy

Xi takes on Trump over protectionism, makes case for Chinese economic leadership

Reuters/bloomberg

Chinese President Xi Jinping offered a vigorous defense of globalization Tuesday, pushing back against the “America first” rhetoric of incoming U.S. President Donald Trump and signaling Beijing’s desire to play a bigger role on the global stage.

Xi’s speech to political leaders, CEOs and bankers at the World Economic Forum in Davos, Switzerland, was the first by a Chinese leader and marked a possible shift in the global political landscape as Western democracies struggle with the rise of populist nationalism.

China, a one-party communist state that maintains tough restrictions on foreign investment, would seem an unlikely champion of free markets at an event that has become synonymous with global capitalism.

But with Trump promising a more protectionist, insular approach and Europe preoccupied with its own problems, from Brexit to terrorist attacks, China sees an opportunity to fill what could become a vacuum in global economic leadership.

Speaking before a vast audience that included U.S. Vice President Joe Biden, Xi likened protectionism to “locking oneself in a dark room” and cutting off all “light and air.”

“No one will emerge as a winner in a trade war,” Xi said in the nearly hourlong speech.

Real estate mogul and former reality TV star Trump, who will be inaugurated as president on Friday, campaigned on a promise to confront China more aggressively on trade and renegotiate or ditch multilateral trade agreements.

His entourage has accused China of waging economic war against the United States.

But Xi pushed back against the accusations of unfair trade practices, saying Beijing would not devalue its currency for competitive advantage, as Trump has accused it of doing.

His remarks illustrated he is taking seriously Trump’s threats to confront him with tariffs and currency measures after he takes office.

“It shows China is not underestimating the danger of a trade war breaking out,” said He Weiwen, deputy director of the Beijing-based Center for China and Globalization and a former business attache in New York and San Francisco. “China used to be a mere supporter of the U.S.-led global economic order. Now, as the incoming U.S. presidency shows signs of retreating, China is stepping up to take a leading role.”

Xi also urged all signatories of the landmark climate deal agreed upon in Paris in December 2015 to stick to the agreement — a clear message to Trump, who has criticized the deal and indicated he may pull the United States out of it.

In a sign of China’s ambitions, more than half a dozen senior Chinese government figures joined Xi in traveling to Davos, a bigger and more high-level delegation than in previous years.

A large number of WEF panels are focused on Asia, including one titled “Asia Takes the Lead.”

“In a world marked by great uncertainty and volatility, the world is looking to China,” WEF founder and chairman Klaus Schwab said before welcoming Xi to the stage.

The Chinese leader has sought to leverage his country’s economic strength into diplomatic clout with multinational initiatives such as the Asian Infrastructure Investment Bank and his signature plan to expand infrastructure along ancient trading routes to Europe. At Davos, Xi announced a global summit on the strategy for May, saying Chinese investment in more than 100 countries had surpassed $50 billion over the past three years.

Arthur Kroeber, Beijing-based founding partner of Gavekal Dragonomics, said the announcement provided Xi a platform to demonstrate his overseas clout back home, where he is preparing for a midterm reshuffle of the party’s leadership ranks.

“It’s in Xi’s interests to take every opportunity he can and present himself as this leader who is powerful, strong and visionary, to give himself some international prestige,” said Kroeber, author of “China’s Economy: What Everyone Needs to Know.” Xi’s appearance at Davos, which has previous been attended by China’s premiers, is “consistent with the notion that Xi is now the only major authorized spokesman for the whole country.”

Drawing another contrast with Trump, Xi urged other countries to keep their doors open to Chinese investors and said he had no plans to devalue the yuan in order to boost competitiveness.

“He is persuading Trump to give a second thought to remarks he made as president-elect,” said Wang Wen, executive dean of the Chongyang Institute for Financial Studies at Renmin University in Beijing. Wang said Xi was following an old Chinese adage of “trying peaceful means before resorting to force.”

Former Swedish Prime Minister Carl Bildt, reacting to Xi’s speech on Twitter, said: “There is a vacuum when it comes to global economic leadership, and Xi Jinping is clearly aiming to fill it. With some success.”

Ian Bremmer, president of the political risk consultancy Eurasia Group, tweeted: “Davos reaction to Xi speech: Success on all counts. Miles away from any official Chinese speech before.”

Xi’s appearance comes at a time of rising tensions between Beijing and Trump, who broke with decades of precedent last month by taking a congratulatory telephone call from the president of Taiwan, which Beijing sees as part of China.

Last week Trump said America’s “one-China” policy is up for negotiation, triggering a furious response from state-run Chinese newspapers, which said Beijing would be forced to “take off the gloves” if Trump did not change his rhetoric.

Although Xi painted a picture of China as a “wide-open” economy, his government has come under mounting criticism from trading partners for its continued restrictions on foreign investment at a time when its state-run firms are aggressively pursuing acquisitions in Europe.

In an apparent nod to these criticisms, China’s Cabinet announced ahead of Xi’s speech that it would take steps to ease limits on investment in banks and other financial institutions. No further details were provided.

Some officials, speaking on condition of anonymity, suggested that China is simply maneuvering to take economic advantage of what appears to be a growing divide between the United States and Europe.

“Today, I think there is a big question mark as to how China pivots in this world,” said Bob Moritz, global chairman of PricewaterhouseCoopers, in Davos. “Will they be more regional or global in their mindset and, more importantly, in their negotiations? It’s something we are going to have to watch over the next 12 months.”

Fears of a hard economic landing in China roiled global markets during last year’s WEF meeting.

Those concerns have eased, but the International Monetary Fund warned on Monday about ongoing risks to the Chinese economy, including its high reliance on government spending, record lending by state banks and an overheating property market.

Xi tried to send a reassuring message, saying the economy has entered a “new normal” driven by household consumption. Despite a sluggish global economy, he said China’s economy likely grew by 6.7 percent in 2016.

But some economists in Davos remain cautious.

“China is still one of the biggest risks, and I think the only reason it is not at the top of the list is that the United States has become such a locus of uncertainty,” said Kenneth Rogoff, an economist at Harvard University.

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