China’s Premier, Li Ke­qiang, praises free trade, in con­trast to Trump

Tehran Times - - ECONOMY -

Premier Li Ke­qiang of China reaf­firmed on Tues­day his coun­try’s de­sire to be seen as the world’s new leader in glob­al­iza­tion and free trade, but he of­fered no specifics on how China might lower its own trade bar­ri­ers, which are among the steep­est of any large coun­try.

Speak­ing at the open­ing of a World Eco­nomic Fo­rum con­fer­ence in north­east­ern China, Mr. Li por­trayed his countr y as deeply com­mit­ted to a con­tin­ued open­ing up to in­ter­na­tional com­pe­ti­tion. With­out nam­ing the United States or the Trump ad­min­is­tra­tion, he also said that it was wrong to blame free trade for eco­nomic or so­cial prob­lems.

“When we sprain an an­kle when walk­ing on the road, we should not blame the road and stop walk­ing,” Mr. Li said, later adding that “in in­ter­na­tional eco­nomic re­la­tions, one should not im­pose uni­lat­eral rules.”

“Only in this way can we achieve free and fair trade.” President Trump ve­he­mently de­nounced the state of trade with China and other coun­tries dur­ing the elec­tion cam­paign, blam­ing it for widespread job losses among Amer­i­can man­u­fac­tur­ing work­ers. That ar­gu­ment helped Mr. Trump win the White House and has gained some trac­tion among econ­o­mists who say the ben­e­fits of glob­al­iza­tion have not been shared equally, though they point to other fac­tors also elim­i­nat­ing jobs.

But since tak­ing of­fice, Mr. Trump has fo­cused more on non-China sub­jects, such as with­draw­ing the United States from the Trans-Pa­cific Part­ner­ship, a trade agree­ment among a group of Asian and Pa­cific na­tions that did not in­clude China, and start­ing a rene­go­ti­a­tion of the North Amer­i­can Free Trade Agree­ment.

Mr. Li’s stance nonethe­less rep­re­sents a clear con­trast to the Trump ad­min­is­tra­tion’s rhetoric, said Eswar Prasad, a Brook­ings In­sti­tu­tion spe­cial­ist in trade and mone­tary pol­icy who is at­tend­ing the con­fer­ence. “There’s re­ally a cog­ni­tive dis­so­nance com­ing from Wash­ing­ton to here,” Mr. Prasad said. “Wash­ing­ton is all about tear­ing down things.”

Yet while Mr. Li briefly men­tioned that China would open up its ser­vices and man­u­fac­tur­ing sec­tors, a re­peated Chi­nese prom­ise over the past quar­ter-century, he of­fered no de­tails. Com­merce Sec­re­tary Wil­bur Ross has re­peat­edly ac­cused China of be­ing the most heav­ily pro­tected large econ­omy in the world.

World Trade Or­ga­ni­za­tion data shows that China has much higher tar­iffs on im­ports than the United States, the Euro­pean Union or Ja­pan, though its tar­iffs are lower than those of some de­vel­op­ing coun­tries such as In­dia. China also has many reg­u­la­tory bar­ri­ers to im­ports and con­sis­tently runs large trade sur­pluses, par­tic­u­larly in man­u­fac­tur­ing — a cat­e­gory that has cre­ated tens of mil­lions of jobs in China as com­pa­nies around the world have moved fac­to­ries to the coun­try.

President Xi Jin­ping of China started pre­sent­ing his coun­try as the new leader of glob­al­iza­tion and free trade at the meet­ing last win­ter of the World Eco­nomic Fo­rum in Davos, Switzer­land. The fo­rum’s event in Dalian, in­for­mally known as Sum­mer Davos, fo­cuses on tech­nol­ogy, in­no­va­tion and po­ten­tial dis­rupters to the multi­na­tional com­pa­nies whose executives pre­dom­i­nate at the Swiss event.

Mr. Li also ad­dressed two other sub­jects of broad eco­nomic in­ter­est dur­ing his key­note speech: fi­nan­cial risks in China, and the coun­try’s long but grad­ual slow­ing of eco­nomic growth.

China’s steeply ris­ing level of do­mes­tic debt re­cently prompted Moody’s to down­grade the coun­try’s sov­er­eign debt. Bank lend­ing has been ris­ing strongly, al­though much of it is to state-owned com­pa­nies with im­plicit gov­ern­ment guar­an­tees of re­pay­ment.

Chi­nese bankers and in­sur­ers have in­creased sales of of­ten spec­u­la­tive, weakly reg­u­lated investments called wealth man­age­ment prod­ucts to raise money for loans to real es­tate de­vel­op­ers and small and medium-size busi­nesses. Small and medium-size busi­nesses are also bor­row­ing heav­ily from peer-to-peer in­ter­net lend­ing groups and other new, lightly reg­u­lated fi­nan­cial in­no­va­tors.

Mr. Li ac­knowl­edged fi­nan­cial risks and pro­vided a broad as­sur­ance that they would be man­aged. But he pro­vided no de­tails on how this would be done and em­pha­sized the im­por­tance of con­tin­ued eco­nomic growth — the lat­est hint of the gov­ern­ment’s wari­ness of crack­ing down too hard on lend­ing for fear of hurt­ing growth.

“We do not deny th­ese risks,” he said. “We are very aware of th­ese risks, but lack of de­vel­op­ment is the great­est risk.”

The Chi­nese econ­omy grew 6.9 per­cent in the first quar­ter, helped partly by a flood of credit. Mr. Li said that the growth mo­men­tum in the first quar­ter was con­tin­u­ing in the sec­ond quar­ter.

But he also cau­tioned that the sheer size of the Chi­nese econ­omy th­ese days no longer makes it fea­si­ble for the econ­omy to grow at the dou­ble-digit rates it used to achieve, and he of­fered what he said was his fa­vorite ex­pla­na­tion for why this was the case.

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