Since Donald Trump became U.S. president, Chinese President Xi Jinping has emerged as one of the protectors of the global trade order. Given the rigid control that his government maintains over its economy, there is a striking gap between his claims and the reality of China’s economic policies. This week, Xi again staked out a position in opposition to that of Trump, promising to continue to open China’s economy and seeming to de-escalate a looming trade war with the United States. Both positions are to be applauded, but only if Xi follows through.
Xi first claimed to be the world’s leading “free trader” in a 2017 speech at Davos, and he has returned to that high ground in every trade speech since. This week, he promised to continue to liberalize China’s economy, “significantly open market access” to foreign companies and lower import tariffs on products like cars. Xi said his government would raise the foreign ownership limit in the automobile, shipbuilding and aircraft sectors “as soon as possible” along with measures to open the financial sector. He also promised greater protections for intellectual property — a sore point for China’s trade partners.
Policymakers and markets breathed a sigh of relief after the speech, which they interpreted as an attempt to turn down the temperature on the trade dispute with the U.S. They were pleased with his promise to “refrain from seeking dominance and … refrain from ‘beggar thy neighbor’ ” policies. He urged an ongoing commitment “to openness, connectivity and mutual benefits” as well as “trade and investment liberalization and facilitation, [and to] support the multilateral trading system.”
If applause was restrained, it was because the substance of the speech was not new, and the reforms had been promised before. China has pledged since 2013 to loosen restrictions on foreign joint ventures in its auto industry and lift the current limit of 50 percent holdings by foreign firms, which would allow majority foreign-owned companies. Vice Premier Liu He pledged at this year’s Davos meeting that China would lower auto import tariffs in an “orderly way” and open markets as well. The big question now is the degree to which China will follow through.
Trump said he was “thankful” for Xi’s remarks and promised that the U.S. and China “will make great progress together.” Chinese officials were insistent, however, that the moves had “nothing to do with the current China-U.S. economic and trade conflicts.” The two countries are not holding and have not planned any talks after several rounds of trade sanctions and tit-for-tat retaliation, and Chinese officials repeat that negotiations are impossible under “current circumstances.” Nevertheless, U.S. officials remain optimistic that a full-blown trade war can be averted.
Xi delivered his speech at the Boao Asia Forum (BAF), a China-hosted event that is held each year in the southern Chinese city of Boao in Hainan province. The BAF was initiated in 1998 as a forum to discuss regional development and integration. Originally a pan-Asian initiative — its founders were former Prime Minister Morihiro Hosokawa, former Philippine President Fidel Ramos and former Australian Prime Minister Bob Hawke — it has become a Chinese-hosted and -dominated meeting. It retains an Asian veneer, however: The new chairman of the BAF is former United Nations Secretary-General Ban Ki-moon, who replaced former Prime Minister Yasuo Fukuda.
The BAF aims to become the Asian alternative to the Davos meeting. It is symbolic of a larger ambition to replace non-Asian initiatives like World Economic Forum meetings or the Shangri-La Dialogue (SLD), a regional security conclave hosted by the London-based International Institute for Strategic Studies and held each year in Singapore. China launched the Xiangshan Forum to compete with the SLD and it is slowly gaining prominence and status.
The test of such conclaves is the degree to which they provide a spectrum of opinions and offer insight into the thinking of participating governments, rather than merely providing platforms for propaganda and bromides. For the most part, China-based initiatives aim to create Beijing-controlled venues that challenge platforms that do not back China’s message. In other words, truly valuable meetings compare rhetoric with reality and do not let the former obscure the latter.
Japan, like other countries, should support Xi’s reform efforts, but it should demand that China live up to its president’s rhetoric. Prime Minister Shinzo Abe should work with Chinese reformers to press for liberalization as well as support for the world trade order. The two positions are perfectly consistent, and those efforts would underscore the important role that Japan is playing — through its stewardship of regional trade initiatives like the Comprehensive and Progressive Trans-Pacific Partnership and the ensuing domestic reforms — to promote and sustain a liberal and open global trading system.