China's Xi pledges to open economy to the world, again

Chinese President Xi Jinping gave a speech on Tuesday where he promises the China would lower tariffs on vehicle imports this year as one of many measures to “open its economy to the world”.

However, several analysts and economists pointed out that there was little new content from Xi, whose address at the Boao Forum was the first time he has spoken publicly since the trade war escalated with the US.

Xi suggested China would "significantly" lower import tariffs for cars, trim duties on other products and enforce legal intellectual property rights for foreign firms.

He added that China will take the initiative to expand imports this year and "work hard" to import products that are required by the population, as well as improving the investment environment for foreign companies, removing restrictions on foreign ownership of companies operating in China’s car, ships and aerospace sectors.

"China does not seek trade surplus," Xi said. "We have a genuine desire to increase imports and achieve greater balance of international payments under the current account."

Some observers noted that he proposed many steps that Beijing had already discussed in some form, including the reduction of tariffs on imported vehicles which the Chinese government had already promised to do “gradually” in November.

Economists said these measures have been planned and largely outlined by the one-party state for some time, but it is likely the pressure from US and EU has pushed China to implement them more quickly.

Although Xi didn’t address the US directly, he said problems had to be tackled through dialogues and not confrontation: "We hope developed countries will stop imposing restrictions on normal and reasonable trade of hi-tech products and relax export controls on such trade with China."

He also spoke along very similar lines laid out at last year's World Economic Forum at Davos, when he warned of protectionism and spoke in favour of free trade and global cooperation.

“The Cold War mentality and zero-sum game are increasingly obsolete. Only by adhering to peaceful development and working together can we truly achieve win-win results,” said Xi, who last month was effectively endorsed by the Communist party as President for life.

The speech comes after a few weeks of trade tension between the two political powers in which both countries have implemented heavy tariffs on imports. Both countries have been in close talks to try and reach a trade agreement.

Stock markets worldwide which have been very wary this past few weeks given the political tensions between China and the US, are responding to these declarations positively. Asian stock markets were up this morning and Wall Street closed with moderate earnings.

Asian markets climbed strongly on the news, sending European stock indices off to a good start.

Some were less convinced. While equities reacted positively, the reality seems to be that the speech contained very little new material and was largely a rehash of a speech given by Xi at Davos in January 2017, said Rabobank.

Asia economist Julian Evans-Pritchard at Capital Economics said Xi's pledge to speed up efforts to reduce trade and investment barriers, boost competition and bolster intellectual property protections "could provide Trump with an opportunity to back down from his tariff threats while claiming a victory of sorts" but examining the finer details, he felt there "was little in Xi’s speech that we haven’t heard before and nothing that would address broader US concerns over China’s trade practices".

Still, its conciliatory nature appeared to have struck the right tone for the markets, said Rebecca O’Keeffe, head of investment at Interactive Investor, providing some relief for investors who have been buffeted by the recent war of words between Trump and China over trade.

"While there was already an overwhelming sense that Chinese officials were keen to achieve a negotiated settlement before the proposed tariffs do any lasting damage to either the Chinese or US economies, today’s speech was the clearest indication yet that China is prepared to take concrete steps to address some of Trump’s chief criticisms. The big question is whether President Trump will now take the olive branch offered by Xi’s conciliatory approach and dial down the rhetoric from his side too," she said.

Danske Bank said the "world will be watching China closely" and it was "cautiously optimistic" that China will follow through on its words, as reforms have moved to the top of the agenda. "Xi Jinping has a strengthened mandate and more power to push through the reforms he has outlined for some years."