Xi vows to reduce import tariffs
• Comments boost stock markets and dollar on hopes compromise will avert a trade war
Chinese President Xi Jinping has promised to open the country’s economy further and lower import tariffs on products including cars, in a speech seen as an attempt to defuse an escalating trade dispute with the US.
Chinese President Xi Jinping promised on Tuesday to open the country’s economy further and lower import tariffs on products including cars, in a speech seen as an attempt to defuse an escalating trade dispute with the US.
While most of the pledges are previously announced reforms, which foreign businesses say are long overdue, Xi’s comments sent stock markets and the dollar higher on hopes of a compromise that could avert a trade war.
Xi said that China would sharply widen market access for foreign investors, a chief complaint of the country’s trading partners and a point of contention for US President Donald Trump’s administration, which has threatened billions of dollars in tariffs on Chinese goods.
“President Xi’s speech appears to have struck a relatively positive tone and opens the door to potential negotiations with the US in our view. The focus now shifts to the possible US response,” economists at Nomura said.
The speech at the Boao Forum for Asia in the southern province of Hainan had been widely expected as one of the president’s first major addresses in a year in which the ruling Communist Party marks the 40th anniversary of its landmark economic reforms.
Xi said that China would raise the foreign ownership limit in the car, ship-building and aircraft sectors “as soon as possible” and push previously announced measures to open the financial sector.
“This year [2018], we will considerably reduce auto import tariffs, and at the same time reduce import tariffs on some other products,” Xi said.
He also said “Cold War mentality” and arrogance would be repudiated. His speech did not specifically mention the US or its trade policies, which have been assailed by Chinese state media in recent days.
Vice-Premier Liu He had already vowed at the World Economic Forum in January that China would roll out marketopening moves in 2018 and that it would lower car import tariffs in an “orderly way”.
Chinese officials have been promising since at least 2013 to ease restrictions on foreign joint ventures in the car industry, which would allow foreign firms to take a majority stake. They currently are limited to a 50% stake in joint ventures and cannot establish their own wholly owned factories.
Tesla CE Elon Musk has railed against an unequal playing field in China and wants to retain full ownership over a manufacturing facility the company is in talks to build there. “This is a very important action by China. Avoiding a trade war will benefit all countries,” Musk tweeted after Xi’s speech.
Foreign business groups welcomed Xi’s commitment to reforms, including promises to strengthen legal deterrence on intellectual property violators, but said the speech fell short on specifics.
“Ultimately US industry will be looking for implementation of long-stalled economic reforms, but actions to date have greatly undermined the optimism of the US business community,” said Jacob Parker, vice-president of China operations at the US-China Business Council.
Jonas Short, head of the Beijing office at Everbright Sun Hung Kai, said the market was cheered by Xi’s speech because it was framed in more positive terms that could ease trade tension but he voiced caution about promised reforms.
“China is opening sectors where they already have a distinct advantage or a stranglehold over the sector,” Short said, citing its banking industry.
Xi’s renewed pledges to open up the car sector come after Trump criticised China on Twitter on Monday for maintaining 25% car import tariffs compared to the US’s 2.5% duties, calling such a relationship with China not free trade but “stupid trade”.
Analysts have cautioned that any Chinese concessions on cars would be a relatively easy win for China to offer the US, as plans for opening that sector had been under way well before Trump took office.
But Qian Keming, the viceminister of commerce, said that China’s economic reforms were driven by domestic factors and not external pressure.
Xi also said China would speed up the opening up of its insurance industry, with Shanghai Securities News citing a government researcher after the speech saying foreign investors should be able to hold a controlling stake or even full ownership of an insurance company in the future.
ULTIMATELY US INDUSTRY WILL BE LOOKING FOR IMPLEMENTATION OF LONG-STALLED ECONOMIC REFORM