After trade war talks, Beijing must invest wisely on home front
- As well as keeping in mind agreements reached by Xi Jinping and Donald Trump in Argentina, China’s leaders have to ensure planned stimulatory tax and spending measures are carefully targeted
The trade war with the United States and the three-month truce negotiated by President Xi Jinping and President Donald Trump set the tone for the latest Central Economic Work Conference. Top leaders had to keep in mind the agreements reached by Xi and Trump in their Buenos Aires meeting aimed at paving the way for a trade deal, while mapping out a strategy for keeping economic growth on track amid a deepening slowdown.
Domestically the strategy will mean deeper tax cuts and more spending to counter economic headwinds. On the trade and investment front, the leaders, under Xi’s chairmanship, called for further opening up with relaxed market access and better protection of legitimate rights of foreign investors. Intellectual property rights would be protected and foreign investors allowed full ownership of ventures in a wide range of sectors, though China would stick to its goal of further developing the strength of the state sector.
Beijing has since rolled out a draft foreign investment law banning forced technology transfers to address a long-standing grievance at the heart of the row with the US. It is an important affirmation from the Chinese side of the agreements in Argentina. Analysts say it is a guarantee for multinationals although critics warn it will need strong enforcement if it is to make much difference.
According to state news agency Xinhua, the law would prohibit forced technology transfer through administrative measures and require technology cooperation to be on voluntarily agreed terms and business practices. That is in marked contrast with reports Trump is now considering an executive order in the new year to bar US companies from using network equipment made by Huawei Technologies and ZTE Corporation on national security grounds.
That said, the conference, attended by nearly all senior leaders, agreed that China must eventually rely on the huge potential of its home market for future prosperity. To boost consumer confidence and spending, services would be increased in education, health care, childcare, entertainment and culture. Hopefully, officials responsible for these initiatives will be mindful of Xi’s speech to mark the 40th anniversary of the opening up, in which he highlighted the need for equal treatment for state enterprises and the private sector, which accounts for more than 80 per cent of jobs and a greater share of gross domestic product.
We trust that the planned stimulatory tax and spending measures are carefully targeted, and that officials do not add to the legacy of ill-disciplined stimulatory spending, such as debt, waste, economic imbalances and corruption. Top leaders acknowledged the need for investment to upgrade manufacturing, roll out new 5G networks, develop artificial intelligence and improve rural infrastructure.