This week the who’s who of politics, economics, tech and business are gathered at the World Economic Forum in Davos. This year’s has so far been starkly different from previous summits, as the two biggest events of 2017 (so far), i.e. Brexit and the incoming less trade-friendly US administration, are against everything that Davos - the global problem-solving think-tank - stands for. This year the US shunned the annual global getaway, with no president-elect official representation.
Interestingly, this is the first year that a Chinese president has addressed the ‘global elite’ and funnily enough economic globalisation and free trade were high up on Xi Jinping’s agenda. Taking centre stage on Tuesday, Jinping made it very clear that China is against trade protectionism stating: ‘Countries should view their own interests in the broader context and refrain from pursuing their own interests at the expense of others, adding ‘we should not retreat into the harbour whenever we encounter a storm or we would never reach the opposite shore.’ Whilst not mentioning any names, China’s president stated that ‘The problems troubling the world are not caused by globalisation,’ later emphasising, ‘no one will emerge as a winner from a trade war… China will keep its doors open,’ adding that he hopes other countries will reciprocate ‘and maintain a level playing field’.
US commerce secretary nominee, Wilbur Ross was quick to bite back claiming China is the ‘most protectionist’ major economy; effectively saying that Beijing should practise what it preaches. This follows comments where he stated that he will fix ‘dumb trade’ deals which previous US administrations engaged in with China and Mexico; also labelling Obama’s TPP a ‘horrible deal.’ Meanwhile Sun Jiwen, the spokesman for China’s Ministry of Commerce suggested that China is not looking to play trade games, and instead wishes to co-operate with the US, adding the two countries can look to solve problems ‘through dialogue and negotiation’. Alibaba’s Jack Ma would also like to see China and the US get along, saying he would like to give Trump ’more time’ adding ‘he’s open minded, he’s listening’. Highlighting the dire consequences of the world's two largest economies falling out of bed with one another, Ma stated that he would be willing to give up his own company to prevent such an event.
Xi Jinping this week echoed what Chinese policy makers have reiterated time and time again, that it is not their wish to devalue the renminbi to make exports more competitive. But their intention is to manage the redback against the recently expanded CFETS currency basket; of which the dollar is a large component. Non-manufacturing activities make up over half China’s GDP, so why, after all the country has done to reform its economy to more sustainable, consumer-led growth, would it wish for a weak currency; a rhetorical question. The offshore renminbi is up over 1.9% against the dollar and over 2% versus sterling so far this year, at time of writing.