Michael Sainsbury
January 25, 2017

President Xi comes to Davos

Trade

President Xi comes to Davos

Xi Jinping: Describing an unrecognisable China at the Davos love-in

The timing of Chinese leader Xi Jinping’s debut appearance at the annual global gabfest that is the annual World Economic Forum in the once barely-known Swiss ski resort of Davos last week was perfect.

It was a big occasion, a big stage, and China’s propaganda chiefs rose to the occasion with surprising acuity, handing their leader a speech that was a minor masterpiece.

It presented to the world than man that China’s image-makers have created: Xi Dada –or Uncle Xi, the powerful, but benevolent force for good. To this nationalist domestic image they have now added the inclusive globalist whose aim is nothing short of improving the world, not just China.

It was the very antithesis of Trump’s ‘America First’ screed.

Mr Xi hit all the right notes and the media coverage was particularly upbeat: China makes its play to slide into the power vacuum that has opened up in Washington following the inauguration of President Donald Trump and the turmoil in the European Union caused by Brexit, the refugee crisis and ongoing economic woes.

Mr Xi began with an impassioned defence of globalization, music to the ears of the assembled throng and for the innovation and technology sectors to be front and centre.

But as anyone who pays attention to the rhetoric-versus-reality of China will know (and as is customary from the senior comrades) we only got half the story.

“From the historical perspective, economic globalization resulted from growing social productivity, and is a natural outcome of scientific and technological progress, not something created by any individuals or any countries,” Mr Xi said.

“Economic globalization has powered global growth and facilitated movement of goods and capital, advances in science, technology and civilization, and interactions among peoples,” he said.

And so, for the uninitiated, Mr Xi marked out a new and unknown China, one that promotes open information flows embraced globalization and free markets.

Yet to even casual observers of China, Mr Xi described a country not recognizable from the one he steers, where he has reversed course in many areas, like increased repression and censorship, and where many major sectors remain closed to substantial private investment and completely closed to foreign investment.

Recent surveys by the American and European Chambers have record levels of dissatisfaction and difficulty of doing business in China.

Nowhere has this been more striking that in the technology sector, where major companies like Google have effectively left the market, sick of kowtowing to China’s censors.
Others like Cisco Systems and the European/US mobile phone network companies have simply had their technology reverse engineered and have been replaced by home grown equipment made by Huawei Technologies and others.

Incongruously Mr Xi’s speech was also timed for the announcement by China’s State Council of plans to welcome for foreign investment. Many have already been bitten and a certain shyness has developed but there are still plenty. Facebook, for instance, is doing its darnedest to get in, right down to Mark Zuckerberg learning to speak Mandarin

To start Mr Xi laid out in note-prefect phrasing the global malaise.

“On the one hand, with growing material wealth and advances in science and technology, human civilization has developed as never before. On the other hand, frequent regional conflicts, global challenges like terrorism and refugees, as well as poverty, unemployment and widening income gap have all added to the uncertainties of the world,” he said.

“Many people feel bewildered and wonder: What has gone wrong with the world?”

Well may a man who has presided over increasing internal conflict, terrorism and a growing wealth gap, ask. Because whatever the answer to the question, the solution is most certainly less oppressive and censorious regimes where the rule of law does not get a look – likes like China’s – rather than more of them.

And then his solutions to the malaise, none of them rocket science but in this US era of ‘alternative facts’ he has a very receptive audience.

“First, we should develop a dynamic, innovation-driven growth model. The fundamental issue plaguing the global economy is the lack of driving force for growth. Innovation is the primary force guiding development.

“Unlike the previous industrial revolutions, the fourth industrial revolution is unfolding at an exponential rather than linear pace. We need to relentlessly pursue innovation. Only with the courage to innovate and reform can we remove bottlenecks blocking global growth and development,” he said.

Yet under Xi, China has determined that its state should place walls around knowledge by restricting its citizens’ access to information via the censorship of its increasingly powerful Great Firewall of China.

Just this week the government announced plans to completely outlaw the Virtual Private Networks that allow people inside China – including foreign media and company staff – to circumvent the GFW.

The regime has also tightened open discussion in its universities. There is not even the pretence of a free press, business and market transparency are extremely limited. These things are the true friends of an innovative, questioning society – but are seen by China’s ruling Communist Party as the enemy.

“Second, inadequate global economic governance makes it difficult to adapt to new developments in the global economy,” Mr Xi continued.

Yet no other major economy on earth has such inadequate economic governance and regulation, because nothing is separate from or above the Party.

“Third, uneven global development makes it difficult to meet people’s expectations for better lives,” he said, adding that: “The richest one per cent of the world’s population own more wealth than the remaining 99 percent.”

Well, he would know. The wealth gap, represented quantitatively by the gini coefficient which measures the size of the average income gap between the rich and the poor, is greater in China – and expanding rather than concentrating. This means that gap under Mr Xi’s regime has been increasing and is far greater than in any nation the in the west.

Xi explained that the lack of robust driving forces for global growth was making it difficult to sustain the steady growth of the global economy, an implicit admission of China’s own growth economic woes.

And he noted that at the G20 leaders’ summit in the Chinese city of Hangzhou last year, innovation was (unsurprisingly) identified as a key driver and would “foster new driving force of growth for both individual countries and the global economy.” He then put his finger on a range of things that need to be undertaken to achieve this.

These included adopting a “multi-pronged approach to address both the symptoms and the underlying problems”, “new policy instruments” and advances to structural reform to create more “space for growth and sustain its momentum” for and new growth models and that must “seize opportunities presented by the new round of industrial revolution and digital economy.

“We should meet the challenges of climate change and aging population. We should address the negative impact of IT application and automation on jobs. When cultivating new industries and new forms models of business models, we should create new jobs and restore confidence and hope to our peoples,” he said.

All very obvious but in Mr Xi’s lists, many things such as structural reform, the open access to all markets that comes with free trade, China is either baulking at or doing it “with Chinese characteristics.”

The man who presides over the GWC also wants world leaders to take a “well-coordinated and inter-connected approach to develop a model of open and win-win cooperation as well as “global connectivity”, free trade and investment, and saying no to protectionism.

For sure, Mr Xi’s speech described very much what western countries and businesses – especially the technology sector – want.

And if China pursues the market based reform, re-structuring and free markets it has promised and joins in a cooperative global effort that is needed, as explained by the Chinese leader, we – and China – will all be better off.

But there are few signs right now that this is happening.

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