Driving the Day
1. Xi says China is open for business
Xi gave a speech at the China International Import Expo (CIIE) today.
Some context: The CIIE was held for the first time last year amid much fanfare (see November 5, 2018 Tip Sheet). Over 100,000 people attended.
This year’s expo is of a similar size and scale. It boasts participants from 155 countries and 26 international organizations.
Xi’s message – China is open for business (Xinhua 1):
- “China’s door will only open wider and wider.”
But Xi’s facing an uphill battle winning over many in the foreign business community (Reuters):
- “Some European companies felt cheated at last year’s inaugural expo, according to a survey by the Shanghai chapter of the European Chamber of Commerce in China, released on Monday.”
- “Many of the deals made last year were not later realized.”
- “More than half the companies surveyed said they would not attend this year.”
- “One respondent said last year’s expo fully lived up to their expectations – but only by being ‘awful’ in both organization and results.”
Get smart: China is making efforts to facilitate foreign trade and investment. But for many foreign businesses (and governments), it is too little, too late.
2.Officials wary about capital account opening
Lou Jiwei was at it again this week.
The former finance minister – and Trivium favorite – spoke at a financial forum in Beijing over the weekend.
Lou advocated for financial opening.
For Lou, it’s all about learning from the rest of the world:
- “[Financial opening] is mainly about introducing rules from mature markets.”
- “That doesn’t just include supervisory rules, but also more mature rules and concepts.”
Lou said China’s immature regulatory regime hinders inbound flows:
- “To attract mature institutional investors from overseas, we first need to improve on supervision methods, rules, and procedures.”
Lou also proposed allowing investors to short stocks to better discern their real prices.
That all sounds good to foreign investors.
But, it’s not all good news.
Lou cautioned against capital account opening:
- “Capital market opening doesn’t equal capital account opening.”
- “Large, short-term cross-border flows have no economic benefits.”
Get smart: In recent months, a number of liberal-minded financial officials have warned against capital account opening.
Get smarter: The specter of a “financial war” with the US has officials spooked about capital outflows.
3.Xi tells Lam to carry on
Guess who else was in town for Shanghai’s big import expo?
Hong Kong Chief Executive Carrie Lam.
On Monday, Xi Jinping had a sit-down with Lam.
Some context: This is the first timeLam hasmet publiclywith Xi since anti-government protests first gripped Hong Kongin June.
In public, Xi had nothing butkind words for the embattled chief executive:
- Xi praised Lam’s “hard work” in trying to stabilize the situation in Hong Kong.
Xi told Lam he’s got her back (Xinhua):
- “The central government has high trust in you and fully affirms the work of you and the governance team of Hong Kong.”
Also at the meeting: Minister of Public Security Zhao Kezhi.
Why that’s interesting: Zhao was recently added to the Party’s leading small group on Hong Kong. It’s a sign that Beijing is looking to work more closely with Hong Kong law enforcement.
Our take: Despite the public show of support, we’re betting Xi would still like to see Lam go (see the October 23 Tip Sheet).
Our question: What did they really talk about?!!?
SCMP:China’s Xi Jinping meets Hong Kong leader, backs Carrie Lam’s ‘hard work’ amid protests
4.Xi to come to US to sign trade deal – maybe
We know you are sick of the trade war. And the never-ending negotiations.
So are we.
And yet, we feel obligated to give you the latest.
Xi Jinping, apparently, is willing to go to the States to sign a deal (Bloomberg):
- “China is reviewing locations in the U.S. where President Xi Jinping would be willing to meet with DonaldTrump to sign the first phase of a trade deal…people familiar with the plans said.”
- “Officials in Beijing had hoped that if Xi traveled to the U.S. to sign stage one of the agreement it would be as part of a state visit, but they’re open to having him go even if it isn’t, people familiar with the matter said.”
That said, nothing has been decided:
- “No final decision has been made, said a Chinese official, who asked not to be named discussing the private negotiations.”
Foreign ministry spokesperson Geng Shuang was certainly noncommittal (MoFA):
- “Regarding the meeting…, I’d like to note that President Xi and President Trump have stayed in contact through various means.”
Get smart:Xi traveling to the States raises the stakes and makes Chinese officials justifiably nervous about having the rug pulled out from under them.
5.When Li met Abe
On Monday, Premier Li Keqiang met with Japanese Prime Minister Shinzo Abe on the sidelines of the ASEAN summit in Bangkok, Thailand.
According to the readouts, the meeting was positive – if a little bland.
Li said (Gov.cn):
- “We should… respect each other’s core interests and major concerns, focus on common interests, properly handle sensitive issues, enhance mutual trust, and forge a healthier, stable and lasting China Japan relationship.”
And Abe said:
- “Japan is willing to strengthen dialogue and communication with China, deepen practical cooperation and close coordination in international and regional affairs.”
Highlight of the meeting: The two decided that the annual China-Japan-South Korea trilateral summit will be held in Chengdu, Sichuan in December.
Why that’s important: There had been concerns that this year’s summit would be cancelled due to tensions between Japan and South Korea.
Get smart: Fear and distrust still liedeep on both sides of the East China Sea. But an erratic, confrontational US is pushing both China and Japan to improve relations.
What to watch: Xi is expected to make a state visit to Japan in spring next year.
China planning trilateral summit with Japan and South Korea in December
6.Xi told cadres to read the Tip Sheet
Last week, the Party’s top ideological journal – Qiushi – published a speech on Party-building given by Xi Jinping in July (see July 10 Tip Sheet).
In the speech, Xi reminded everybody who they work for:
- “Party members and cadres, regardless of their [position]…need to bear in mind that their first duty is to work for the Party.”
Then the big man got nostalgic.
- “In the war era, the Party center and Chairman Mao sent their commands to the Party and army via radio…and they followed them unconditionally.”
Beautiful story bro.
To recreate the good old days, Xi has told officials that they must keep up with the following:
- People’s Daily commentaries
- CCTV’s nightly 7:00 pm news show
Pro tip for cadres: Just read the Tip Sheet – we cover these outlets daily!
Xi also told them to be better at following the rules:
- “At present, the main problem is that rules are not followed and implementation is ineffective.”
Get smart: Xi has obsessively rewritten the Party’s rules. But it’s all for naught if nobody follows them.
What to watch: The soon-to-be-released decisions from the Fourth Plenum may shed light on how the Party plans to address the problem of rulebreaking by officials.