Xi, facing scepticism, to position himself as champion of reform

His address today will give him a high-profile chance to solidify a reputation he has sought to hone

By BLOOMBERG

BEIJING • Xi Jinping is expected to use a speech in Beijing to argue that the four decade- old reform process which transformed China’s economy is continuing, at a time when increasing state control and confrontation with the US fuel scepticism.

The Chinese president’s address today at a party gathering in Beijing, marking the 40th anniversary of Deng Xiaoping’s “Reform and Opening Up”, will give him a high-profile chance to solidify a reputation he has sought to hone since Donald Trump’s election as US leader in 2016.

The event offers an opportunity to address criticism levelled at Xi’s policies — including his signature Belt and Road Initiative, industrial-development strategy and protectionism — that have pushed forward his trade battle with Trump and concerns over the aims of Beijing’s expanding global influence. The more assertive approach has led to an unusual domestic debate about whether China was mistakenly abandoning Deng’s advice to lie low and bide its time.

The speech will be closely watched for any mention of a change in trade policy in light of a truce struck two weeks ago with Trump on the sidelines of the Group of 20 Summit in Argentina. It will set the tone for Communist Party leaders’ annual economic policy gathering due later in the week, capping a year that saw China’s economy slowing and its stock market losing more than US$2 trillion (RM8.36 trillion) in value.

Incoming economic data point to the need for further policy support for the economy.

Industrial production growth in November decelerated to a pace below all economists’ estimates. Retail sales — formerly a pillar of support — posted the weakest performance since May 2003.

People’s Bank of China governor Yi Gang indicated ongoing policy accommodation last Thursday. Economists expect such support to involve another 200 basis points of reduction to the required reserve ratio for major banks, a measure that’s been used several times this year, according to Bloomberg survey published last Friday.

The Economic Work Conference lays down priorities for economic policy for the coming year, although detailed targets aren’t usually released until annual legislative sessions in March. At a meeting of the party’s 25-member Politburo led by Xi last week, top leaders signalled that campaigns announced last year against financial risk, pollution and poverty would continue.

While Deng advocated market- based reforms to make China rich, Xi has pivoted toward reasserting state control to turn the country into a political and technological superpower.

“The reform era as we know it has basically ended” and the focus has changed under Xi, Fraser Howie — co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise” — told Bloomberg Television yesterday.

“The past 40 years have largely been unpicking the problems of the first 30,” Howie said. Xi’s government is “already rolling back reform in some way by the greater influence of the state and this other blurring of private and state owned lines,” he said.

No Surprises
Xi’s addresses at recent events such as the Asia-Pacific Economic Cooperation forum in Papua New Guinea and the China International Import Expo in Shanghai, have repeated stock ideas: China’s commitment to opening its economy, and its support for a system of multilateralism and global trade.

China ranks 59th out of the 62 countries evaluated by the Organisation for Economic Cooperation and Development in terms of openness to foreign direct investment.

Almost half of companies surveyed in June by the European Chamber of Commerce in China said they missed out on business opportunities due to regulatory barriers or market- access restrictions.

This year’s slowdown could strengthen Xi’s desire to push for China’s technological self-sufficiency — especially in light of legal action taken this year by the US against Chinese technology titans ZTE Corp and Huawei Technologies Co Ltd — said Lance Noble, senior thematic policy analyst at Gavekal Dragonomics in Beijing.

“The belief that China must attain control of core technologies will not suddenly disappear in 2019,” he said.