China’s Next Move Expected During Speech Tonight

Following Trump’s Sunday morning tweet, in which the US president said that he will always be friends with Chinese president Xi Jinping no matter what happens yet at the same time predicted that China will be first to blink in a trade war, tweeting that “China will take down its Trade Barriers because it is the right thing to do”, traders were spooked by an overnight report that China is studying yuan devaluation as a tool in the trade spat.



As such, the speech by China’s president Xi Jinping tomorrow (technically tonight in the US) at the Boao Forum for Asia, China’s answer to Davos, is taking on added importance.

As trade tensions between US and China escalate with few if any silver linings, the speech by China Premier Xi Jinping at the Boao Forum – China’s answer to Davos – will be keenly watched. The full agenda of the meeting can be seen hereHe will speak between 9:30-11:30am local time (21:30-23:30 EST)

While it remains to be seen if protectionism will be on the agenda, China’s President will deliver the keynote speech and analysts suggest that China will use the speech to announce market access reforms, as well as embrace globalism, while potentially downplaying the growing trade war with the US.

“If Chinese President Xi Jinping announces market reforms at a scheduled speech on Tuesday, that could help heal U.S.-China trade frictions, said Myron Brilliant from the US Chamber of Commerce. The question on the table is how big the reform package will be and how specific it will be.” – CNBC

Chinese Foreign Minister Wang Yi said last week that the speech would be “the most authoritative interpretation” of the new measures planned to mark the 40th anniversary of reforms that launched China’s economic boom.

According to the SCMP, China’s plan to create free trade ports as part of its ongoing reform and opening up could be one of Xi’s major announcements at the forum, that started yesterday. The SCMP writes, “Amid a growing trade dispute with the US, Xi will be keen to use the Boao Forum for Asia to reassure the world that China remains open for business” and adds that “on Sunday morning, Chi Fulin, the head of the China Institute for Reform and Development, a think tank in Hainan, said on state television that the island would be at the forefront of the opening up of China’s services market, covering everything from tourism to health care, and easier access for foreign companies.”

However, as Bloomberg notes, any reconciliatory tone from Xi “obviously won’t resolve the trade skirmish. Trump has asked China to take down trade barriers, accept reciprocal taxes and protect intellectual property. These are the areas that China is willing to work with. The negotiations are about how much of a concession China is willing to give.”

It’s reasonable to suggest that noise about the “trade war” is peaking. But it’s also worth keeping in mind that there seems to be a perception among Chinese leaders that the Plaza Accord was the root cause of Japan’s Lost Decade. China shouldn’t repeat the same mistake by being bullied into a trade deal that will be detrimental to its long-term growth, so goes the thinking.

This means that while the verbal “foreplay” in the coming trade war may be ending, it will be up to Xi – and China’s official response to the latest proposed $100BN tariffs – to determine what the US will do in the coming months.


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About the Author: Tyler Durden