It is nearly impossible to escape the shadows being cast from the trade war engulfing the United States and China.
Even at the Boao Forum on the tropical island of Hainan, the opening keynote speech from Chinese Premier Li Keqiang was peppered with reassuring words before another round of ‘peace’ talks were due to take place nearly 2,800 kilometers away in Beijing.
“We are quickening the full opening of market access for foreign investors in banking, securities and insurance sectors,” he told an audience comprised of politicians, diplomats and business leaders at what is known as “Davos in the sun.”
“Such measures will be implemented this year in a relatively forceful way,” Li added.
Back in the capital, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin were preparing to sit down with China’s Vice-Premier Liu He over a working dinner in a bid to reach an all-encompassing agreement. Breaking the deadlock was the main course on the menu.
Opening up China’s economy further to foreign competition has been on the agenda for years. But the China-Sino trade conflict has forced Beijing to revise its timetable.
At the annual National’s People Congress earlier this month, a raft of measures were rolled out to pacify Washington and silence complaints from the European Union.
Li simply put the flesh on the bones. He pointed out in his address that market access for banks and credit rating companies will be “expanded sharply.” Restrictions on foreign securities firms and insurance brokers will also be removed later “this year.”
He then outlined plans to level the playing field with home-grown companies when it comes to overseas acquisitions of Chinese listed firms. Hopefully, this will be included in Beijing’s new foreign investment law, which is scheduled to be rolled out by the end of 2019.
Turning his attention to China’s cooling economy, Li was just as bullish.
“China’s economy has been operating steadily since the beginning of the year, with positive changes emerging and market expectations being improved,” he said.
“China will not resort to massive economic stimulus to boost growth, but will continue to open up and innovate to energize market players and strengthen endogenous impetus for economic development,” Li added.
Yet his comments appeared to contradict an array of data from the National Bureau of Statistics.
In January and February, the unemployment rate jumped to 5.3% from 4.9% in December, while the consumer price index nudged higher to 1.5% last month.
Industrial companies also took a massive hit during the same period. On Wednesday, statistics showed profits plunged by 14% in the first two months of the year. It was the biggest drop since the height of the Global Financial Crisis in May 2009.
A short statement from the NBS blamed the decline on the Lunar New Year holiday shutdown in February. “Compared with last year, this year’s holiday factor has a longer impact on the production and operation of industrial enterprises,” it said.
Economists were skeptical. “Although it’s possible [the] US and China could come to a trade deal in the near future, [there] still remains a question [whether] that [will] help reverse the decline in China’s exports,” Betty Wang, a senior China economist at ANZ, said.
Even a report released earlier this week by the research company, China Beige Book, failed to offer a crumb of comfort. The study showed “an unmistakable first-quarter recovery,” fuelled by debt.
“I don’t think people understood the level [to which] there was a decision by Beijing … to reverse course on deleveraging and all the progress they made,” Leland Miller, the chief executive officer of China Beige Book, told CNBC. “The idea that deleveraging has continued through 2018 and into 2019 [is] laughable.”
Again, those findings were at odds with Li’s overall view of the economy. This, in turn, makes it crucial that a trade war, which has inflicted tariffs of up to US$250 billion on Chinese imports, is brought to a swift conclusion after dragging on for 10 months.
“Talks will take part later tonight [Thursday],” Gao Feng, a spokesman for the Ministry of Commerce, said at a regular media briefing. “They are expected to last the full day on Friday. Progress has been made but [other sticking points] remain.”
Still, unnamed Washington officials have confirmed that “China has made unprecedented proposals on a range of issues, including forced technology transfer,” according to Reuters news agency.
Intellectual property rights and the theft by stealth of US technology by Chinese companies are crucial areas of concern for US President Donald Trump’s administration. A business model favoring state-owned companies in the world’s second-largest economy is yet another.
“If you looked at the texts a month ago compared to today, we have moved forward in all areas. We aren’t yet where we want to be,” the official said, speaking on condition of anonymity.
The next 48 hours should shed further light on those issues and pave the way for another round of talks in Washington next week.
For the global economy, the dawn of a new deal cannot come quick enough.