Davos darling Xi not practising what he preaches: analysts

January 18, 2017
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In his Davos keynote speech, China’s President Xi Jinping insisted China was committed to “opening up”/AFP-File 

, BEIJING, China, Jan 18 – Xi Jinping’s hymn to globalisation at Davos may have won acclaim from the meeting’s well-heeled elite, but Chinese experts say it was distinctly out of tune with an administration that is increasingly closed and hostile to the outside world.

In his highly anticipated keynote speech Tuesday, Xi insisted China was committed to “opening up” and said there was “no point in blaming economic globalisation for the world’s problems”.

The remarks received high praise from 3,000 of the great and the good gathered in the Swiss ski resort, looking for a hero to stand against the massing forces of protectionism in Europe and the US.

But the Chinese president makes for an odd idol: far from welcoming the outside world, he has overseen a sprawling crackdown aimed at rooting out foreign influence in law, academia, civil society, and technology.

Since he became leader of the ruling Communist Party in 2012, the government has moved away from liberalisation on several fronts, strengthening state-owned enterprises, increasing capital controls, and heightening restrictions on free exchange of information and ideas online.

Strict limits on foreign investments in China often force overseas companies to enter joint ventures with local competitors and share technology/AFP-File 

If anything, China’s commitment to open markets has “deteriorated” under Xi’s leadership, Willy Lam, professor at the Chinese University of Hong Kong, told AFP: “There has been a retrogression.”

So it is “ironic and contradictory” for people to see him as a potential champion of globalisation, he said.

‘A sumptuous buffet’

China maintains wide-scale prohibitions on foreign investments even as its companies spend billions snapping up stakes in European companies, sports clubs, airports and other infrastructure.

Beijing has urged its firms to go abroad in search of higher returns and advanced technologies to make them more competitive in a range of high-value sectors, from aerospace to agribusiness and robotics.

But at home, strict limits on foreign investments often force overseas companies to partner with local competitors and share vital technology.

In a report released Wednesday by the American Chamber of Commerce in China, a record 80 percent of 462 US businesses who replied to a survey said they felt that foreign companies were less welcome than in the past.

“Globalisation doesn’t just mean exporting and buying up foreign assets,” said the group’s chairman William Zarit.

In September the EU Chamber’s president Jorg Wuttke blasted the “unequal investment landscape” between the economies, telling reporters in Beijing that “for the Chinese, Europe is a sumptuous buffet, anything goes, very nice, and for us it’s four dishes and a soup, you can’t do more.”

State-owned China National Chemical Corp. on February 3 offered 43 billion USD in an agreed takeover for Swiss pesticide and seed giant Syngenta/AFP-File

While Xi’s Davos speech may have seemed a refreshing contrast to Donald Trump’s parochialism, in reality, China is “aggressively pursuing mercantilist and protectionist policies,” said Victor Shih of the University of California San Diego.

In his remarks, Xi said it is “simply impossible” to stop the international flow of goods and services, but China is currently engaged in “the most sophisticated and extensive exercise in capital control in the world,” he added.

The country recently put restrictions on movements of funds exceeding $5 million out of the country.

Contrary to Xi’s words, Shi said, “the actions of the Chinese government suggest that it in reality it believes that the flow of capital, technologies and people can be controlled.”

‘People see it for what it is’

China has made some noise about further opening its economy, with Beijing seeking to attract more capital from abroad in the hope of balancing massive outflows from investors seeking higher returns overseas.

Authorities Wednesday said they will allow foreign companies to launch IPOs on the stock market and issue corporate bonds.

And last month, they decided to allow non-Chinese firms to operate fully-owned subsidiaries, rather than joint ventures, in certain sectors.

But multinationals and China’s trading partners continue to complain about access to Chinese markets.

China ranked 84th globally behind Saudi Arabia and Ukraine in the World Bank’s ease of doing business index for 2016, and second to last in an OECD report on restrictiveness towards foreign investment.

As Christopher Balding of the Peking University HSBC Business School noted, Beijing only permits a tiny number of foreigners to reside permanently in the country, has strengthened censorship of overseas websites, and has an average tariff rate of 9.6 percent for WTO members compared to the US rate of 3.5 percent, according to WTO data.

Davos attendees may be charmed by Xi’s talk of global integration, he said, but economists and businesses working in China are not.

“People see it for what it is,” he said, “an agreement to promote Chinese mercantilism.”

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