Driving the Day
1. Xi’s magisterial trip to North Korea
Xi Jinping was in North Korea Thursday. It was the first visit to the country by a Chinese leader since 2005.
Xi’s arrival was majestic, according to Xinhua:
- “Xi’s plane arrived at the Sunan International Airport around noon.”
- “Bathed in sunshine shortly after rain, the DPRK capital was brimming with a friendly atmosphere.”
There’s nothing like Pyongyang in late June…
But that’s not all:
- “Under Chinese and DPRK national flags and large welcome banners, nearly 10,000 people lined up at the airport, waving flowers and chanting cheerful slogans to welcome the Chinese guests.”
- “Amid thunderous cheers, Xi and his wife, Peng Liyuan, walked out of the cabin.”
Xi’s talks with North Korean leader Kim Jong-un were similarly monumental (Xinhua 2):
- “The two countries, said Xi, have jointly drawn a plan for a bright future of bilateral ties, and reached a streak of major consensus at his fruitful meeting with Kim.”
- “The two sides agreed that China and the DPRK need to unswervingly pass down their traditional friendship from generation to generation.”
Get smart: Given the tightly controlled information environments in both countries, it’s near impossible to know how Xi’s visit really went.
One thing we do know: Both sides are keen to show that relations are strong.
2.Guo Shuqing denies all US accusations
Ahead of the Xi-Trump meeting next week, you might expect the Chinese side to soften its rhetoric – in hopes of getting the negotiations back on track.
But at least one official isn’t backing down.
In an op-ed in today’s People Daily, Guo Shuqing – head of the banking regulator and Party boss of the central bank – deniesall the accusations of unfair trade practices that the US and other countries have leveled at China.
On IPR theft:
- “Exchanging technology for market access or market access for technology…is a widely accepted practice in market economies.”
On state capitalism:
- “China’s industrial policy and credit policy are guidelines, but the implementation of these policies firmly follows market and legal principles.”
On Party influence over companies:
- “Facts have proven that the establishment of a modern enterprise system and adherence to the leadership of the Party are completely compatible.”
- “Such a governance structure can form…effective checks and balances, which will better protect the interests of stakeholders; prevent…manipulation by large shareholders; and address…board members’ dereliction of duty.”
Get smart: Guo’s message is meant for the domestic audience. But this kind of rhetoric narrows the space for China to give ground on structural issues that the US wants to address.
The bottom line: This is going to be a long trade war.
3. Li tells foreign CEOs that China is open for business
On Thursday, Li Keqiang met with CEOs from nearly 20 multinational companies —whoare in Beijingto attend the Global CEO Roundtable.
These lucky companies got a shout out in state media:
- Schneider Electric
- BHP Billiton
Li stressed that China remains committed to globalization (Gov.cn):
- “Currently, there are many uncertainties…in the international situation.”
- “We should promote the steady growth of the global economy and trade, improve the global industrial chain, and strive to maintain a peaceful international environment.”
He also wanted to let everybody know that China is open for business:
- “We welcome enterprises from all countries to continue to expand investment in China and share in opportunities afforded by China’s development.”
And the Chinese government is working to address the concerns of foreign companies:
- “All enterprises registered in China, whether domestic or foreign, are treated equally and fairly.”
- “All legitimate rights and interests, including intellectual property rights, will be effectively protected.”
Get smart: China is rolling out the red carpet for foreign investors these days. Unless you’re American – then it’s a bit more complicated.
4.New negative list to emerge this month
Yesterday, MofCom announced its intention to release a revised negative list for foreign investment by the end of June.
Actually, it’ll be releasing two: one for pilot free trade zones and one for the rest of the country.
MofCom hopes to placate foreign investors (Xinhua):
- “We will continue to study in depth the reasonable concerns and problems raised by foreign-funded enterprises, intensify reform efforts, and strive to create a more stable, fair, transparent, and predictable investment environment.”
Some context: Chinese officials promised a new negative list, which would relax restrictions on foreign investment, at the Boao Forum back in March.
More context: If you’ve been reading the Tip Sheet, or otherwise paying any attention to government pronouncements during the past several months, you’ll know that the financial sector has been leading the charge in terms of increased market access.
Get Smart: The government is now desperate to show good faith in continued opening. But foreign investors have seenthis song and dance before, so the proof will be in the pudding.
Our take: We are optimistic that pragmatism will win out – and Beijing will take more concerted opening steps as it looks to keep the foreign business community on side.
Xinhua: China to soon unveil new foreign investment negative lists
5.Facebook’s crypto ambitions may challenge Alipay
Two days ago, Facebook officially announced the impending launch of Libra, its own cryptocurrency.
Why that matters to China: Now that there’s a potential new contender in the digital international remittance space, Alibaba may be forced to step up its game.
Facebook’s project pitch is heavy on the Silicon Valley do-gooder vibes (WSJ):
- “Facebook says its currency will make it possible to provide basic financial services to millions of people around the world who don’t have a bank account, or who can’t afford to send money overseas.”
Proponents say that Libra will be less volatile than Bitcoin, because it will be backed by hard assets, and governed by a Facebook-led consortium made up of tech and payment industry titans.
The discussion in China is a bit more cynical (Abacus):
- “[Libra is] a tool for the US dollar to continue its dominance …[that] will hurt the internationalization of China’s own currency.”
Not so fast: Facebook still has lotsof regulatory hoops to jump through.
But still, the race to dominate the global digital payment space is on.
Get smart: Alipay has been content to gradually expand its international reach, primarily by riding on the back of the Chinese outbound travel industry and Jack Ma’s eWTP initiative. Facebook’s foray into the space may change that.