HONG KONG • US President Donald Trump's barrage of tariff threats has left China's President Xi Jinping with a tricky balance to strike. He has got to show he is ready to retaliate against US trade threats while demonstrating China's commitment to opening up.
Mr Xi's first chance to hit back in person comes in a speech tomorrow at the Boao Forum for Asia - China's answer to Davos - on the tropical island of Hainan.
Besides reassuring the hundreds of foreign investors and leaders present that US protectionism will not produce the same in the world's second-largest economy, he must deliver a strong warning about letting the tariff disputes escalate into a trade war.
"You've got to push back and defend yourself in some way and at the same time say, 'We are still open for business'," said Mr Fraser Howie, co-author of the book Red Capitalism.
Mr Xi set out his defence of globalisation at the World Economic Forum in Davos last year, just days before Mr Trump took office promising to protect the US from "other countries making our products, stealing our companies and destroying our jobs".
After an initial honeymoon with Mr Xi, Mr Trump has renewed his China attacks, threatening to pile on as much as US$150 billion (S$197 billion) of tariffs on the country's goods. The levies represent an unprecedented challenge to Mr Xi, who cannot afford an economic downturn that fuels unrest or to look weak after securing backing to extend his rule indefinitely at China's annual parliamentary session last month .
China in recent days has pledged retaliatory tariffs that would hit politically sensitive US regions and vowed to fight "to the end, and at any cost".
State media yesterday called on industrial and commercial sectors in the US to rally against Mr Trump's plans for extra tariffs against Chinese goods.
China has launched a World Trade Organisation complaint against the US, triggering a 60-day deadline for the two countries to settle the matter.
All eyes are on Mr Xi's address at the Boao Forum after Chinese Foreign Minister Wang Yi said last week that the speech would be "the most authoritative interpretation" of the new measures planned to mark the 40th anniversary of reforms that launched China's economic boom.
Sources told the South China Morning Post that China's plan to create free trade ports as part of its ongoing reform and opening up could be one of Mr Xi's major announcements at the forum, that started yesterday.
The new ports would enjoy much greater freedom in terms of policymaking than existing free trade zones and be more open in terms of market access, according to a person with knowledge of the matter. A second source told SCMP: "The openness (at the new ports) will be much higher than at the Shanghai Free Trade Zone… and even higher than in Hong Kong."
Said Mr Scott Kennedy, a China scholar at the Washington-based Centre for Strategic and International Studies: "It's possible that he (Xi) will continue the generic general promises of liberalisation. But he could try to finally be quite specific and forward-leaning and try to pop the American bubble by making a variety of changes that open up Chinese markets."
BLOOMBERG
