Nearly two years later, Xi is locked in a trade war with Trump and hasn’t succeeded in persuading the world that he’s serious about opening the economy quickly. The China International Import Expo in Shanghai, a Xi brainchild set to open Monday with some 3,000 companies from more than 100 countries, gives him another chance to finally win over his sceptics.
Enthusiasm hasn’t been high in the run-up to the event. While 18 heads of state or government are slated to attend, virtually all are from small economies. Of G-20 countries, only Russia is sending a head of state or government.
There’s also a notable dearth of top business chiefs. Although the event is meant to gather foreign companies to woo the Chinese consumer, global brands from Adidas to Walmart, Procter & Gamble to Uniqlo, are sending only country heads — or no senior executives at all. Starbucks Corp. CEO Kevin Johnson, whose company opens a store in China every 15 hours, won’t be attending even though he’ll be in the same city.
China is under pressure from Trump and elsewhere to wind back its $423 billion goods trade surplus with the world, and Xi has already pledged that the country will import $24 trillion dollars of goods from abroad over the next decade and a half. While Trump has floated the possibility of a deal when he meets Xi in the coming weeks, they remain far apart on market access and government support for state-run enterprises.
“I don’t think he will commit to new things before the serious negotiations take place," Ding Shuang, chief China economist at Standard Chartered Bank Ltd in Hong Kong, said of Xi. “It’s more like a summary of all of the opening measures China has taken."
Xi’s speeches over the past few years have tended to repeat stock lines, such as China’s commitment to opening its economy, its support for the global trading system and backing for multilateralism. Yet his words have also underwhelmed investors looking for a level playing field in the world’s second-biggest economy.
China ranks 59th out of the 62 countries evaluated by the Organization for Economic Cooperation and Development in terms of openness to foreign direct investment. Almost half of companies surveyed in June by the European Chamber of Commerce in China said they missed out on business opportunities due to regulatory barriers or market access restrictions, and they expected obstacles to increase during the next five years.
China is partly to blame for setting high expectations at the beginning of the year. Vice Premier Liu He—Xi’s top economic aide—told global business leaders in Davos, Switzerland, in January that 2018 would be a pivotal year for reforms and “some measures will exceed the expectations of the international community."
So far, that’s primarily meant easing rules on foreign ownership of financial firms and automakers. International banks like JPMorgan Chase & Co. in the US and UBS Group AG in Switzerland have moved closer to acquiring majority stakes in local joint ventures. Last month, BMW AG became the first foreign car company to take advantage of a new policy allowing for majority control of local partnerships.
‘Old Play Book’
But overall the measures have been piecemeal and slow. Investors are still waiting for China to announce a slimmed-down “negative list" specifying which areas of the economy are off-limits to foreign companies, now promised by the end of March 2019.
Xi’s idea of holding an import expo to solve trade frictions in many ways epitomizes the gap between China’s policies and the expectations of the outside world. In the face of criticisms like theft of intellectual property and cumbersome joint-venture requirements, China’s answer always seems to be “buy more."
“This is just something from the old play book of going on a buying mission when you have problems," said James McGregor, China chairman of the consultancy APCO Worldwide, which advises foreign companies.
Given the big corporate presence, deals will get done — led by China’s state-owned enterprises. Ninety-five SOEs supervised by the central government are sending procurement teams to the week-long expo, and the agency overseeing them says more than a dozen deals are expected to be signed on Tuesday between some of China’s largest state behemoths and foreign companies.
“Short term for political reasons, I predict China will try to ensure there are positive results to highlight," said Claire Reade, senior counsel at law firm Arnold Porter and a former USTR representative in China. “It always is a question whether these are real deals and whether they are deals that would have been made whether the forum was held or not."
About 180 US companies are sending representatives, including big names such as Alphabet Inc.’s Google, Boeing Co., Caterpillar Inc., Facebook Inc., General Motors Co., Honeywell International Inc., Microsoft Corp., Tesla Inc. and Qualcomm Inc.
Yet the US government is mostly staying away, even though China said Trump voiced support for the expo in a call with Xi last week. A US Embassy spokesperson said the Trump administration had no plans to send a high-level representative, adding that “China needs to make the necessary reforms to end its unfair trade practices that are harming the world economy.’
EU leaders agree with many of Trump’s criticisms but have taken a softer tack. In a joint letter published by the Chinese publication Caixin, the French and German ambassadors to China said that companies from their countries were looking forward to the event. But they also called on China to further open its economy, taking ‘concrete and systematic measures that go beyond tariff adjustments.’
Either way, few people are expecting the import summit to lead to a breakthrough in global trade tensions.
“CIIE is not a market-oriented event in nature and if the Chinese government is bent on importing more products, someone has to pay the bill," said Pang Zhongying, an international relations professor from Macau University of Science and Technology. “With a weakening economy, I wonder who is capable of picking up the tab."