Xi Jinping to position himself as reform champion in speech marking 40 years of reforms

World stock markets inched higher on Tuesday as investors looked ahead to whether the Fed will be able to raise interest rates much further amid turbulent markets and a weakening outlook for the global economy.
Chinese President Xi Jinping has pivoted towards reasserting state control to turn China into a political and technological superpower.
Chinese President Xi Jinping has pivoted towards reasserting state control to turn China into a political and technological superpower.PHOTO: AFP

BEIJING (BLOOMBERG) - Mr Xi Jinping is expected to use a speech in Beijing to argue that the four-decade-old reform process which transformed China's economy is continuing, at a time when increasing state control and confrontation with the United States fuel scepticism.

The Chinese President's address on Tuesday (Dec 18) at a party gathering in Beijing marking the 40th anniversary of Deng Xiaoping's "Reform and Opening Up" will give him a high-profile chance to solidify a reputation he has sought to hone since Mr Donald Trump's election as US leader in 2016.

The event offers an opportunity to address criticism levelled at Mr Xi's policies - including his signature Belt and Road Initiative, industrial-development strategy and protectionism - that have pushed forward his trade battle with Mr Trump and concerns over the aims of Beijing's expanding global influence.

The more assertive approach has led to an unusual domestic debate about whether China was mistakenly abandoning Deng's advice to lie low and bide its time.

The speech will be closely watched for any mention of a change in trade policy in light of a truce struck two weeks ago with Mr Trump on the sidelines of the Group of 20 summit in Argentina. It will set the tone for Communist Party leaders' annual economic policy gathering due later in the week, capping a year that saw China's economy slow and its stock market lose more than US$2 trillion (S$2.74 trillion) in value.

Incoming economic data points to the need for further policy support for the economy. Industrial production growth in November decelerated to a pace below all economists' estimates. Retail sales - formerly a pillar of support - posted the weakest performance since May 2003.

People's Bank of China Governor Yi Gang indicated ongoing policy accommodation last Thursday. Economists expect such support to involve another 200 basis points of reduction to the required reserve ratio for major banks, a measure that has been used several times this year, according to Bloomberg survey published last Friday.

 
 

The Economic Work Conference lays down priorities for economic policy for the coming year, although detailed targets are not usually released until annual legislative sessions in March. At a meeting of the party's 25-member Politburo led by Mr Xi last week, top leaders signalled that campaigns announced last year against financial risk, pollution and poverty would continue.

While Deng advocated market-based reforms to make China rich, Mr Xi has pivoted towards reasserting state control to turn the country into a political and technological superpower.

"The reform era as we know it has basically ended" and the focus has changed under Mr Xi, Mr Fraser Howie - co-author of Red Capitalism: The Fragile Financial Foundation Of China's Extraordinary Rise told Bloomberg Television on Monday.

"The past 40 years have largely been unpicking the problems of the first 30," Mr Howie said. Mr Xi's government is "already rolling back reform in some way by the greater influence of the state and this other blurring of private and state-owned lines", he said.

No Surprises

Mr Xi's addresses at recent events such as the Asia-Pacific Economic Cooperation forum in Papua New Guinea and the China International Import Expo in Shanghai, have repeated stock ideas: China's commitment to opening its economy, and its support for a system of multilateralism and global trade.

China ranks 59th out of the 62 countries evaluated by the Organisation for Economic Cooperation and Development in terms of openness to foreign direct investment. Almost half of companies surveyed in June by the European Chamber of Commerce in China said they missed out on business opportunities due to regulatory barriers or market-access restrictions.

This year's slowdown could strengthen Mr Xi's desire to push for China's technological self-sufficiency - especially in light of legal action taken this year by the US against Chinese technology titans ZTE Corp and Huawei Technologies Co, said Mr Lance Noble, senior thematic policy analyst at Gavekal Dragonomics in Beijing.

"The belief that China must attain control of core technologies will not suddenly disappear in 2019," he said.