Chinese economy grew 4.9 percent in the third quarter (3Q) of 2020, but pointing the challenges for COVID-19 shocked still shadowed until the end of the year - Photo by Chinese President Office

 JAKARTA (TheInsiderStories) – In Beijing on Tuesday (12/18), China commemorated the 40th anniversary of the “reform and opening up” of the Chinese economy. During the celebration, Chinese President Xi Jinping struck a relatively defiant tone in response to international calls for changes to his country’s economy.

On Dec. 18th, 1978, Chinese leader Deng Xiaoping restructured the Chinese economy, paving the way for individual ownership in some industries and allowing foreign companies limited access. Many credit the policy change for helping lift hundreds of millions out of poverty and turning China into an economic powerhouse that now ranks second below the United States (US).

In his speech, he remarks focused on how China’s Communist party guided the nation to its economic success and emphasized the country’s right to pursue its own path going forward. He says that there is no one to dictate to the Chinese people. China is itself.

He continued, China will never develop by sacrificing themselves for the interests of other countries and also wouldn’t abandon its own legitimate rights and interests. Xi didn’t make mention of trade tensions with the US.

His idea of progress contrasts with other countries’ increasingly vocal demands for less-state control. It could have significant consequences for whether the US reaches a trade deal with China by the end of its 90-day tariff ceasefire.

This is not President Xi’s first speech on the subject. He spoke at the Asia-Pacific Economic Cooperation Forum in Papua New Guinea and the China International Import Expo in Shanghai. He repeatedly emphasized his main idea: China’s main commitment is to open up their economy, and support the system of multilateralism and global trade.

Today, China is ranked 59th out of 62 countries evaluated by the Organization for Economic Cooperation and Development in relation to openness to foreign direct investment. Nearly half of the companies surveyed in June by the European Chamber of Commerce in China said that they had lost business opportunities due to obstacles in the form of policies that restricted market access.

This year’s setback is likely to further strengthen Xi’s desire to encourage China’s technological independence, especially after legal actions taken by the US against one of China’s ZTE Corp. technology retainers and Huawei Technologies Co.

As we know, after Xi assumed power in 2012, Beijing’s initial policy was more market-oriented. But in recent years, the direction has reversed and reform is not moving forward in 8 out of 10 areas tracked by The China dashboard, a joint project between the Asia Society Policy Institute and the Rhodium Group. This is because Xi is a nationalist and has more extreme ideological ideas than previous leaders.

Nationalist economic reform by Xi actually reflects the US President Donald Trump’ rhetoric, stepping up pressure on China with tariffs on the bulk of the country’s exports to America. Beijing retaliated with duties of its own, and the escalating trade tensions between the world’s two largest economies have roiled global markets.

Somehow, Trump and Xi reached a temporary ceasefire earlier this month, agreeing not to increase tariffs through they did reach resolutions on issues such as forced technology transfer within 90 days.

Many parties hope the pressure from the West will push Xi to speed up restructuring of the economy. It’s possible that Xi wants to hold back from revealing too much ahead of further negotiations with the United States. Xi and Trump agreed this month to a 90-day truce in the trade dispute, which halted the threatening escalation of punitive tariffs while the two sides continue negotiations.

China will push to dominate the high-tech industry by 2025. But, it is a sore point with Washington and a contributing factor in trade tensions that have seen the world’s two largest economies slap billions of dollars in punitive tariffs on each other’s products this year.

Even as Xi spoke, stock markets dropped in Asia. Though such speeches are not China’s usual vehicle for announcing specific policy measures, some investors had been hoping for signals that Beijing would take further steps to liberalize the economy or ease tensions with Washington.

Trade risks continue to linger and in the worst case scenario, U.S. sales could slump by as much as 12 percent. UBS highlighted Ford, General Motors and Fiat Chrysler as potential winners should tariffs prohibit imports, as all three have the capacity to boost domestic production.

Meanwhile, auto sales in China fell 14 percent in November over the same month in 2017, the Chinese Association of Automobile Manufacturers.

That slowdown, while partly blamed on the trade war, is also reflective of the Chinese domestic demand losing steam.

Written by Daniel Deha, Email: theinsiderstories@gmail.com