Chinese premier rebuffs 'bloc confrontation', talks up open markets in 'Summer Davos' address

Premier Li Qiang spoke out against efforts from the West to "decouple" their economies from China and engage in "bloc confrontation", part of a high-profile address that also served as a tenacious defence of the country's new energy sector against accusations of overcapacity that have become prolific in recent months.

Speaking at the World Economic Forum's (WEF) Annual Meeting of the New Champions - also known as Summer Davos - on Tuesday, Li affirmed that China's market would remain open, Beijing would continue to optimise the country's business environment and the annual gross domestic product growth target of around 5 per cent would be attained.

"World economic growth is facing a predicament," warned Li during his keynote in Dalian, a port city on China's northeastern coast. "Countries cannot only consider maximising their own interests while ignoring others."

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In a condemnation of what he described as confrontational trade practices, Li made direct reference to a phrase used by the US government to describe its own strategy towards China. "Decoupling and building a 'small yard and high fence' is like reversing the progress of history," he said.

"It will raise the cost of the global economy, foment disputes and plunge countries into a vicious cycle, where everyone tries to get a slice of the pie but the pie itself is not growing any bigger," Li added.

"This is what we don't want to see."

China is presently dealing with a two-front conflict over trade, as the United States and European Union move in lockstep to penalise imports of Chinese EVs and other green products over allegations of subsidies and excess capacity.

And while China and the EU have agreed to talks over the region's planned tariffs on EV imports, that battleground could expand if Canada follows through on the punitive measures it has been contemplating.

As a riposte to their claims, Li said Chinese exports of electric vehicles (EVs), solar panels and lithium batteries are helping to alleviate inflation worldwide.

Having grown by an expectation-beating 5.3 per cent year on year in the first quarter, China's economy is still struggling to carve out a path to a stronger rebound. A downturn in the property sector, mounting debts for local governments and declining foreign investment complicate the outlook further.

Beijing's prescription for these challenges is to expand the market even further and improve the climate for enterprises from overseas, Li said.

"I would also like to say that China's large market is open," Li said, extending an invitation to international firms.

"Foreign companies compete, communicate and cooperate with domestic ones on a level playing field. They have become a major force enabling the growth of emerging industries, and buttressed the sound and sustained development of the Chinese economy."

Expectations are high in the run-up to next month's third plenum of the Communist Party's Central Committee - traditionally a conclave where major decisions on economic policy are made - for Beijing to recommit to statements issued in 2013 enshrining the market's role in resource allocation.

"We should give full play to the market. I usually say two things: let the market play a decisive role in allocating resources and the government should better do its job in creating a fair environment," Li said in a brief question and answer session with WEF founder and chairman Klaus Schwab.

"If we want to develop new industries, we must rely on the market and enterprises," Li added, a pointed statement for the reported 1,700 officials and entrepreneurs in attendance.

Comparing the country's post-pandemic recovery to that of a sick patient, the premier also emphasised the need to balance immediate and long-term goals.

"The most fundamental thing is to balance short-term and long-term treatment of symptoms and cure causes. After years of Covid, the economy is like a person recovering from a serious illness," Li said. "According to the theory of traditional Chinese medicine, strong treatment cannot be used at this time. A precise, gradual approach is more ideal for recovery."

Beijing has ruled out using Western-style quantitative easing to spur growth. Instead, it has stuck to a more familiar approach, using proactive fiscal policy and prudent monetary policy to support the economy, most notably by issuing ultra-long treasury bonds. It has also launched trade-in programmes for equipment and consumer goods while continuing to pursue self-sufficiency in advanced tech.

Li also called for international tech collaboration to foster stronger connections, saying China's outsize market and fertile ground for application scenarios would create a welcoming platform for new ideas as well as tech.

"We have a complete industrial supporting system, and an abundant labour force and talent pool. Chinese consumers are also fairly receptive to new technologies," he said. "All of these make China a broad stage for enterprises to pursue innovation and upgrade their products. Economies of scale can help reduce costs and accommodate different technological road maps and business models."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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