To end the trade war, ‘China must deliver on its promises to reform and open up’

  • Beijing has in recent years resisted opening up further despite the benefits it has brought over the past 40 years, former commerce ministry official says
  • Government may announce more policies when leadership meets next month to celebrate 40th anniversary of reform and opening up, business leader says
PUBLISHED : Monday, 19 November, 2018, 11:32am
UPDATED : Thursday, 22 November, 2018, 2:18pm

China should fully commit to reform and opening up if it wants to resolve its trade tensions with the United States, while both sides should face the reality of their changing relationship, business leaders and diplomatic observers said.

Beijing’s dispute with Washington was not formed in one day and would not be easy to resolve, said He Ning, a former Chinese commerce ministry official dealing with US issues. But Beijing should reflect on whether it had truly delivered on the promises it made on joining the World Trade Organisation (WTO) in December 2001, he said at a forum organised by the Centre for China and Globalisation over the weekend in Sanya, in southern China’s Hainan province.

“Over the decades, our thoughts on reform and opening up should have been updated. The economic growth and better standards of living [achieved] should have provided very solid evidence [of the need] to continue with reforms and opening up,” he said.

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But in fact, during internal government discussions in recent years on topics such as free-trade agreements there had been a resistance to further opening up. He said it reminded him of the situation almost two decades ago when Beijing was seeking to join the WTO and some officials were reluctant to open up the nation’s markets to the outside world.

“I’m a bit sad,” He said.

He’s assessment echoes the long-standing grievances of foreign firms operating in China, which have repeatedly accused the government of dragging its feet on easing market access and reforming state firms to provide a more level playing field. Their complaints have also been fuel for US President Donald Trump in the trade war.

“Whether we can continue to deepen the reforms matters in tackling China-US conflicts,” He said. “When we think of competition we can’t only think about our own benefits, but also [we must consider] common interests. Only when we can do that and all can share in the fruits of China’s economic development will we have a better business environment and improved trade relationships”.

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While Beijing has promised a number of measures to improve market access, there slow implementation has left the foreign business community mostly unimpressed.

At the same forum, William Zarit, chairman of the American Chamber of Commerce in China, said Beijing might announce more policies when the top leadership gathered next month to celebrate the 40th anniversary of the country’s reform and opening up.

He said that if China could swiftly introduce “comprehensive and sweeping” policies it would “get us close to a reciprocal [trading] environment”.

“This is not going to solve all problems, but is going to start to dislodge the logjam and change the momentum,” he said.

Washington and Beijing have been locked in a trade war since July, and have imposed punitive tariffs on hundreds of billions of dollars worth of each other’s products. The US is also wary of China’s efforts to develop its hi-tech sectors and has raised the bar for would-be Chinese investors in its technology industry.

While Beijing has agreed to buy more US goods to reduce its trade surplus, it has refrained from dramatically overhauling its industrial policies as Washington has requested. Their disputes also go beyond trade.

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In their speeches at the Apec summit in Papua New Guinea on Saturday, Chinese President Xi Jinping and US Vice-President Mike Pence exchanged barbs on sensitive trade and geopolitical issues.

David Zweig, director of the Centre on China’s Transnational Relations at Hong Kong University of Science and Technology, said at the Sanya gathering that an important part of China’s reform and opening up had been the re-establishment of diplomatic relations with the US and that the engagement had benefited both sides greatly.

But in the US recently, support for further engagement had waned, he said.

“There are problems in both camps. [But] the ball largely lies in China’s camp, to convince the United States that there are real opportunities … but there [needs to be] serious reforms within China,” he said.

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Shi Yinhong, a professor of international relations at Renmin University in Beijing, agreed that while not all the accusations levelled against it were fair or genuine, China should seriously consider its trading partners’ concerns.

As long as the risks were controllable, “China should take great leaps to adjust its trade policy, reform and open up, so as to demobilise our rivals”, he said this week.

In a bid to reach a ceasefire in the trade war, China has offered to buy more natural gas from the US and improve protection for intellectual property rights, a source said.

Jake Parker, vice-president for China operations at the US-China Business Council, said in Sanya that he was optimistic about a planned meeting between Xi and Trump in Buenos Aires in two weeks. He expected the two leaders to reach an agreement to at least delay the introduction of any new tariffs, but his outlook for the long term is more pessimistic.

China had yet to deliver on its promises, he said, adding that industrial policies, such as “Made in China 2025” and the continued subsidisation of state firms would perpetuate the unfair trading environment and lead to overcapacity.

“After six months of deliberate negotiations, we are going to realise that [these] problems are not going to be resolved immediately,” he said.

“These are challenges of how our economic system operates, and there is not going to be a fundamental and major shift in that period of negotiations. It is going to lead to changes in what the US expects or wants.”

Beijing must fully implement the promises of reforms it had made to date, Parker said.

“It won’t solve the US-China relationship, but it will put it on a trajectory towards continuous negotiations, which is exactly what we need.”