[Analytics] Fact or fiction? Xi’s Shanghai claims

Is it fact or is it fiction?

President Xi Jinping appeared to issue a statement of intent in Shanghai this week when he talked about “globalization,” “breaking down walls” and further “opening up” China’s colossal economy.

Delivering a keynote address at the International Import Expo, he reiterated his pledge to boost “international cooperation” and “remove barriers” to “innovation.”

Yet how did his comments compare to the realities of doing business in the world’s second-largest economy? Here, are the crucial moments from his 30-minute speech. Gordon Watts specially for the Asia Times.

“We need to tear down walls, not to erect walls”

Xi’s sentiments are admirable, but do they reflect what is happening in China? Perhaps, the largest wall in the world surrounds the nation’s online community, which is fed a steady diet of state-run news links and heavy censorship. The Great Firewall has also shut down foreign websites, such as Google unless you use a VPN, or a virtual private network.

In a report entitled Freedom on the Net 2018: The Rise of Digital Authoritarianism, author Adrian Shahbaz said: “China was once again the worst abuser of internet freedom in 2018, and over the past year, its government hosted media officials from dozens of countries for two- and three-week seminars on its system of censorship and surveillance.”

“China will throw open its arms, and provide more market, investment and growth opportunities for countries in the world”

Buzz phrases come and go in the Chinese lexicon. But “opening up” is rooted in the country’s economic success story. Xi’s remarks should not be dismissed lightly. In 2020, the financial sector will “open” even further to foreign competition with Beijing scrapping overseas ownership limits on firms dealing in securities, funds, futures and life insurance. But other key sectors remain strictly out of bounds.

A report released in June by the McKinsey Global Institute, entitled China and the world, said: “China’s services sectors are still subject to a range of restrictions, including limits on the participation of foreign players and other operational barriers. According to the OECD’s FDI restrictiveness index, Chinese services are 4.8 times more restricted than the OECD average.”

“We need to stand firm against protectionism and unilateralism”

Again, Xi’s words ring hollow when it comes to what the European Union calls a “level playing field.” Overseas companies can end up being entangled in red tape and squeezed out by sprawling state-owned enterprises that receive preferential treatment. “Protectionism” by any other name?

Joerg Wuttke, the president of the EU Chamber of Commerce in Beijing, wrote in an annual study entitled European Business in China – Position Paper: “Rather than cutting [China’s] SOEs down to a manageable size, determining the industries that would be most appropriate for them to be operated in and privatizing the rest, the goal has been to make them ‘stronger, better and bigger’.”

“We need to strengthen the protection of intellectual property rights”

Factually correct. Back in April, the Standing Committee of the National People’s Congress rolled out major amendments to IP protection as part of the new Foreign Investment Law. Beijing will bring in the legislation on January 1, 2020. According to media reports, a draft document was released to negotiators in October when talks between the United States and China resumed in Washington to resolve the trade war. Yet would this law have been on the table without pressure from the White House?

Ning Jizhe, a member of China’s delegation at the discussions, told a media briefing in Beijing: “It is an open document and both sides exchanged open documents. We were negotiating on an equal base. The reaction [from the US] was very good.”

“We are in a scientific and technological revolution”

Xi has championed the “Made in China 2025” program through innovation, innovation and innovation. He repeated the mantra in Shanghai when he urged other nations “to independently carry out technology exchanges and cooperation so that the source of innovation can fully flow.” This has become a stumbling block with the US and other allies, resulting in the Huawei ban. There have also been allegations of “forced technology transfer” as the price of gaining a foothold in the Chinese economy.

Cecilia Malmström, the European Trade Commissioner, told Der Spiegel earlier this year: “We see many things in the same way as the US does. We are defending ourselves against state-subsidized companies buying up our most creative companies, we are fighting against intellectual property theft and for greater transparency. We are working closely with the US and Japan on this, for example when it comes to better monitoring Chinese investments in our countries.”

“We will honor our commitments. And we will deliver on what we have promised”

Now, that sounds familiar. Before last year’s Expo, the US and EU business lobbies in China, along with the French and German ambassadors to Beijing, called on Xi’s administration to use the event to announce concrete changes after complaining of “promise fatigue.” The original phrase was coined in 2017 by the EU Chamber of Commerce in China when referring to regulatory barriers. “European businesses are suffering from accumulated ‘promise fatigue,’ having witnessed a litany of assurances over recent years that never quite materialized,” it announced.

More than two years later, French President Emmanuel Macron raised the issue again this week when he said: “Much has been done in recent years … important tariff reductions have been granted. But they must be speeded up and made more transparent. We need greater openness from China … to its domestic market.”

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