Trade War

Newsletter 156 - March 19, 2023

Welcome to the 156th edition of Trade War.

In his first presser, new premier Li Qiang touts his pro-business credentials. The commerce ministry calls on foreign companies to “seize the opportunity” and invest in China. And a survey says Chinese companies are ready to hire more this year. Is this all part of a new pro-market, foreign investor-friendly Beijing?

The Wall Street Journal makes the contra argument (and persuasively) that China instead is on a long-term retreat from Deng Xiaoping’s Reform and Opening. Ongoing institutional reform to strengthen the party’s role includes creation of new agency to tighten control over business and society. And signs of an economic recovery overshadowed by rising unemployment and still cautious consumers.

Policy advisors propose over 20 recommendations to boost the birth rate. And due in part to its legacy of family planning, China has 30 million more men than women.

And one reason China still supports Moscow even when it damages Beijing’s international reputation: because Russia provides “rolling strategic distractions” that keep America busy elsewhere in the world and not focused on China, says incoming Australian ambassador to the U.S.

A pro-market premier?

Premier Li Qiang, a former top aide to Xi Jinping, issued a strong statement of support for the private sector in his first press conference as head of China’s new government on Monday March 13.

The 63-year-old Li, a Zhejiang native who eventually rose to become party secretary of that province (where he earlier served as Xi’s aide), then became the top official in Jiangsu and finally Shanghai, noted his years of work in “localities with a strong private economy,” during the presser.

This gave him the opportunity to interact “with local entrepreneurs on many occasions,” helping him become “well-informed of their aspirations and difficulties in their development,” Li added.

Going forward, Beijing will “continue to foster a market-oriented and law-based business environment in keeping with international standards, treat companies under all types of ownership as equals, [and] protect the property rights of enterprises and the rights and interests of entrepreneurs,” Li promised.

“We will create a level playing field for all kinds of market entities and make further efforts to support private enterprises to grow and thrive. As for development space, China has a super-sized market with huge demand. There are a lot of new sectors and new racing tracks that can be tapped. All this promises great opportunities for private entrepreneurs.”

Praising the local entrepreneurs he met during his years in Zhejiang and Jiangsu, Li said they demonstrated a “strong pioneering spirit,” and “were willing to explore all paths, go through all troubles, try all means and endure all hardships.”

“This kind of pioneering spirit of clearing obstacles and blazing new trails will always be needed,” Li said. Officials, for their part, must “sincerely care for and support the development of private enterprises.”

Li Qiang also made sure to mention Xi’s favored slogan describing the role of private enterprise in China: the “two unswervinglys”, or the policy of “unswervingly consolidating and developing the public sector and unswervingly encouraging, supporting and guiding the development of the non-public sector.” [“non-public” meaning private, in the party’s nomenclature.]

(Here is the full transcript of Li Qiang’s press conference, from the Chinese foreign ministry. You will notice Li mentions Xi eight separate times, clearly wanting to show his devotion to his patron and boss in the most obvious way possible.)

Beijing boosting business confidence

In the face of serious headwinds, including an economy battered by three years of pandemic restrictions and a deep slump in confidence amongst entrepreneurs, China’s new premier, along with other top officials, clearly have a mandate to put out a more business-friendly tone from Beijing.

“Premier Li Qiang, who took office on Saturday, strongly endorsed the role of entrepreneurs after a decade in which the state and the ruling Communist Party have played a steadily growing role in China’s economy, with some pro-party commentators castigating big businesses,” write the New York Times’ Keith Bradsher and Chris Buckley.

“Opening up to the outside is our fundamental national policy, and no matter how the international situation changes, we will be unwavering in advancing it,” the new premier also said during the press conference.

NYT Business @nytimesbusiness

At his first news conference as premier, Li Qiang delivered the most forceful statement by a Chinese leader in years of the need to preserve the vitality of the private sector, @KeithBradsher and @ChuBailiang write.

nyti.msAs Economy Falters, China’s New Premier Tries to Boost Business ConfidenceLi Qiang, the country’s No. 2 leader, sought to reassure entrepreneurs who have been wary of making new investments.

Two Zhejiang cadres on the way up

Here’s a picture of the two top leaders from sometime between 2002 and 2007, when Xi was in charge of Zhejiang and Li was his top aide. It’s a good reminder: Xi and Li go way back.

Yes, Li Qiang has long experience in the private sector-strong provinces of Zhejiang, Jiangsu, and Shanghai, as he reminded us during his first presser as premier. But that’s true of Xi too, who also ran Zhejiang and Shanghai like Li, and while he didn’t run Jiangsu, was in charge of Fujian, also a province known for its strong private business culture and trade links to the world.

Reporters, including yours truly, made a similar prediction over a decade ago that Xi might prove a pro-business leader, given the provinces he had managed. (We were sure wrong.)

Ultimately, will Li Qiang’s pro-business tendencies win out, or will his devotion to his very powerful boss Xi, with his patent Party-above-all mindset, win out? I think the answer is obvious.