Let’s be frank. Speeches by China’s leaders are often given to platitudes rather than political hard truths, and as Xi Jinping made his way to Davos this week the signs were that his address to the World Economic Forum wouldn’t be much different.
Editorials in the Chinese media were flagging his speech in advance and it sounded rather abstract, with hints from the People’s Daily that Xi would be explaining “where humans have come from, where they are now, and where they are going”.
State news outlet Xinhua was triple-positive in its support, predicting a speech that would outline “a new concept of win-win, multi-win, and all-win”.
Back at the People’s Daily there were reports that the Swiss hosts were equally excited – so much so that it was difficult to get hold of an opinion piece penned by the Chinese president in local newspaper Neuer Zurcher Zeitung.
“The storekeeper said it was sold out very early. I could only find one copy after visiting several bookstores,” its reporter revealed. “People are queueing up to buy the newspaper,”
That sounded a little unlikely, although Xi’s Davos speech turned out to be one of the times where top billing was deserved, not just for what was said, but also for the symbolism of who was saying it. As the world waited for Donald Trump to begin his presidency, Xi Jinping made his pitch for China as the new champion of free trade.
Why has the Davos meeting received so much attention?
Coverage of the Swiss shindig focused on two men: one not at Davos, the other there for the first time.
Trump was the absentee, readying for his inauguration as the 45th president of the United States today (which is also the final day of the Davos meeting). His no-show wasn’t unusual – the New York Times reports that Trump has never attended the World Economic Forum – although he sent hedge fund boss Anthony Scaramucci in his place. “My job is to get you to see him and think about him the way we do,” Scaramucci told an audience in Davos, describing Trump as an “unbelievable strategist” with the “best political instincts of his generation of politicians”.
Last year the Chinese dispatched a more junior delegation to Davos at a time when their stock markets were in crisis. But this January the context was different, and heavy hitters from China were in evidence, including Jack Ma of Alibaba and Wang Jianlin of Dalian Wanda, two of the country’s richest men.
Also in the 80-strong team was stock market regulator Fang Xinghai and state-assets boss Xiao Yaqing.
But the most celebrated attendee was Xi Jinping himself, the first Chinese head of state to address the gathering in its 47-year history.
The country’s media celebrated in advance, describing Xi’s trip as “major power diplomacy with Chinese characteristics”.
What did Xi actually say?
His address was more plainspoken than many of his speeches, with a clear warning that “no one will emerge as a winner from a trade war” (should Trump start one).
There was a pledge that the Chinese would keep their doors open and wouldn’t drive down the value of their currency too.
“Pursuing protectionism is just like locking one’s self in a dark room. Wind and rain may be kept outside, but so are light and air,” he warned in a brief excursion into metaphor.
Then he added a folksy twist that had little need of further explanation. “As the Chinese saying goes: People with petty shrewdness attend to trivial matters while people with great vision attend to governance of institutions,” he proposed.
The objective was to stand apart from the ‘America first’ ethos emanating from Washington and the international press was quick to pick up how the Chinese have been championing free trade at a time when it is being questioned elsewhere.
The context isn’t just Trump’s supposedly protectionist instincts but also Theresa May’s speech on Tuesday, which alluded to Britain’s readiness for a ‘hard’ Brexit in exchange for control over its borders.
As traditionally open economies threaten to rip up trade agreements and block immigration, Xi talked up the interdependence of world trade and its benefits for East and West. Some of this isn’t new: the Chinese have been making the case for international initiatives (of their own design) for years, including the spread of Xi’s own Belt and Road plan and the launch of the Asian Infrastructure Investment Bank. But there was a sense that he was going further in embracing the multilateralism of global trade and investment, and acknowledging that no country would prosper by going it alone.
Another key exhibit was the Chinese decision to sign the Paris accord on climate change (Trump has described global warming as a ruse to make US manufacturing non-competitive) and Xi made sure to mention it in Davos, hailing last year’s treaty as “a hard-won agreement” that “all signatories should stick to”.
Of course, whether Xi really fits the mould of ‘Davos Man’ – a term that denotes those who see less need for national loyalties and national borders – is open to debate.
By any token, it’s hard to put China’s president into that camp. Last week’s Talking Point mentioned how Beijing is bolstering its capital controls in defence of its currency, for instance, and WiC reports regularly on the restrictions on foreign access into China’s internet and tech sectors, or the policies that favour its state enterprises over multinational firms.
Xi’s championing of the “Chinese Dream” (see WiC192) echoes a little of Trump’s promise to “Make America Great Again” too.
So there was a hint of the absurd in Switzerland as the world’s most powerful Communist was feted as the champion of global capitalism. Wilber Ross, the businessman expected to run Trump’s trade policy, said the same. “They talk much more about free trade than they actually practice,” he told the Senate commerce committee on Wednesday. “China is the most protectionist country of very large countries.”
How is Xi going to respond as Trump takes on the US presidency?
China’s president will continue to extol the benefits of global trade and investment. He will also defend the contributions of the Chinese – the world’s largest trading nation – in fostering a generation of economic growth.
Xi argued in Davos that China is going to import $8 trillion worth of goods and services over the next five years and that its outbound investment will reach $750 billion in the same period, exceeding the foreign investment flow in the other direction. As he was speaking, China’s State Council announced it would further open the country’s mining, infrastructure, services and technology sectors to foreign investment (although fuller details are yet to be provided).
More generally, China’s leaders have limited their reaction to what Trump says, although they are watching closely for transgressions in the ‘One China’ policy that has anchored Sino-US ties for a generation (see WiC349) and could lead to conflict over Taiwan. “If Trump is determined to use this gambit in taking office, a period of fierce, damaging interactions will be unavoidable, as Beijing will have no choice but to take off the gloves,” the China Daily testily predicted.
With Washington’s commitment to the Asian-Pacific region in question, Beijing will also be keen to capitalise on signs of American disengagement. The demise of the Trans-Pacific Partnership (TPP) has frustrated many of Washington’s trading partners in the region and Trump’s threat to rethink America’s military alliances has alarmed traditional allies, including Japan and South Korea.
Paradoxically the message from Rex Tillerson was far less disengaged last week, when he told his confirmation hearing (to become Secretary of State) that Trump’s administration would confront China’s maritime ambitions in the South China Sea. “We’re going to have to send China a clear signal that, first, the island-building stops,” the former ExxonMobil boss promised. “And second, your access to those islands also is not going to be allowed.”
“Tillerson had better bone up on nuclear strategies if he wants to force a big nuclear power to withdraw from its own territories,” the uncompromising Global Times fired back.
For Xi, domestic politics is more of a focal point?
The backdrop to Xi’s defence of the status quo in Davos is that disruptions to international trade and investment won’t help China in countering its domestic challenges. The International Monetary Fund warned again about the risks to China’s economy this week, citing its reliance on government spending, the record lending by state banks (and the dangers of excessive leverage triggering a debt crisis), as well as the frothy property market.
While the handover at the White House heralds an uncertain period for foreign affairs, Xi will also want to focus on a more predictable transition this year as he starts his own second term as president.
In about 10 months time more than two thousand delegates at the National Party Congress will approve the selection of 350 members of the Chinese Communist Party’s Central Committee. This group then picks the smaller Politburo of about 25, which chooses the Standing Committee, the über elite (of seven) that governs the country on a day-to-day basis. The choreography is crucial for the president, who gets an opportunity to put his people into the key positions as the second term begins, plus the chance to confirm the identity of China’s next leader, who is typically anointed during the transition.
The jockeying for position is intense long before Party Congress meets and we have highlighted how some of the provincial powerbases have been taking shape (see issues 340 and 351). This year there is more intrigue than normal because of uncertainty about who might take over from Xi, and rumours that he might try to stay on for an unprecedented third term. Last October he was designated as “core leader” by Party elders, suggesting that he is more powerful than his predecessor, Hu Jintao, and his political reach has been apparent in the reduced role of Li Keqiang as China’s premier, a position that is nominally number two in the pecking order with oversight of the country’s financial and economic affairs (see WiC241).
Instead Xi has taken on the lead role on key committees tasked with economic oversight, and he also seems to have relied more on Wang Qishan, the head of the agency conducting the nationwide anti-graft campaign, the signature domestic policy of Xi’s tenure. The corruption watchdog is a powerful fiefdom and some of the leading graft busters have been climbing the promotion ladder towards the Politburo’s higher ranks. Despite the convention that senior politicians in China should stand down at 68, there are suggestions that Wang may stay on (he will be 69 when the Congress meets) following recent remarks by senior officials that the retirement rules aren’t set in stone.
Xi must be hoping that Trump doesn’t become too much of a distraction as he turns to dealmaking at home, even though his own style of politicking has little in common with Trump’s preferred method of tweeting against his enemies.
China’s realpolitik is more shielded from the public eye so the world will have to wait to see which of its political elite turns out to be in the ascendant when the new Standing Committee is announced.
In the meantime, Xi’s debut at Davos looks like a smart PR move. In a single hour he succeeded in casting himself as the defender of the global economy, and positioning China as the ‘responsible adult-in-the-room’ at a time of greater than normal uncertainty.
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