In a wide-ranging speech Tuesday, Chinese President Xi Jinping laid out plans for several key areas to make the domestic economy more accessible to foreign businesses.
His remarks at the Boao Forum for Asia alleviated market fears about a U.S.-China trade war and U.S. stocks soared with the Dow Jones industrial average closing more than 400 points higher.
While Xi has addressed these areas of reform previously, Tuesday’s comments contrasted with defensive statements from the Chinese Ministry of Commerce last week in the wake of escalating trade tensions with the U.S. President Donald Trump tweeted Tuesday afternoon that he is “very thankful” for Xi’s “kind words on tariffs and automobile barriers … also, his enlightenment on intellectual property and technology transfers.”
Here are some of the highlights of Xi’s remarks, and some U.S. industries or companies that may benefit:
“China does not seek [a] trade surplus. We have a genuine desire to increase imports and achieve greater balance of international payments under the current account,” Xi said, according to a translation of the speech. The Chinese president also highlighted the first China International Import Expo, set to take place in Shanghai in November, and said it will be an annual event.
Boosting imports helps Beijing in its yearslong effort to transition the country from being manufacturing base dependent on exports into a consumption-driven economy.
Macquarie’s China economist, Larry Hu, expects the country could import more medicine, energy and large aircraft.
“Note that China only put smaller planes on its retaliation list to the U.S. but excluded the 747 and other big planes,” Hu said in a Tuesday report.
Beijing will significantly lower tariffs on imports of automobiles, and also loosen restrictions on foreign ownership in the auto sector, Xi said. Less than 24 hours earlier, U.S. President Donald Trump tweeted that China’s 25 percent tariff on U.S.-made cars versus a 2.5 percent tariff on Chinese-made cars in the U.S. was “stupid trade.”
China is a key market for major U.S. automakers, and shares of GM and Ford climbed nearly 3.3 percent and almost 1.8 percent Tuesday, respectively.
General Motors said in January that China was its largest retail market for a sixth straight year, benefiting from record domestic sales by the Cadillac, Buick and Baojun brands. GM and its joint ventures sold more than 4 million vehicles in China for the first time in 2017, an increase of 4.4 percent.
Ford announced in December that it plans to grow its China revenue by 50 percent by 2025 versus 2017.
China is Tesla’s second-largest source of revenue after the U.S., and sales in the Asian nation doubled to $2 billion in 2017 from the prior year, according to a 10-K filing. Shares closed nearly 5.2 percent higher.
China will speed up its efforts to open up the insurance industry and ease restrictions on the establishment of foreign financial firms domestically, Xi said. The country will also open up more areas of cooperation between Chinese and foreign financial markets, he said, according to an English-language report by Xinhua state media.
Xi also reiterated that China will allow greater foreign investment in banking, securities and insurance. “We will ensure that these measures are materialized,” he said, according to a translation.
The statements come as China has been slowly opening up its historically closed financial markets to global investors.
Franklin Resources, BlackRock and Invesco top UBS’ list of U.S. asset managers best positioned to operate in China, according to an April 4 report.
Among the major U.S. investment banks, Goldman Sachs, Morgan Stanley and Citi have an edge over their peers, the UBS report said.
Protecting intellectual property rights
Xi said China will step up enforcement of intellectual property rights protection and significantly raise the cost for offenders.
“We encourage normal technological exchanges and cooperation between Chinese and foreign enterprises, and protect the lawful IPR owned by foreign enterprises in China,” he said, according to an English translation by Xinhua state media.
The latest annual survey released in January from the American Chamber of Commerce in China found that more than half of member respondents said they still believe intellectual property leakage and data security threats are higher in China than other parts of the world.
“U.S. industries that could benefit from positive enforcement action by China are aviation, AI/machine learning, sensors, semiconductor manufacturing and design, and perhaps copyrighted software,” David Pratt, managing director of M-CAM International, said in an email. M-CAM maintains an archive of documents related to patents and other intangible assets from many countries.
“As China makes advances in artificial intelligence, sensor technologies, aviation manufacturing and semiconductor fabrication among other sectors, its stake in effective IP enforcement has been growing,” Pratt said.
WATCH: Xi renews pledge to open economy
China’s Xi renews pledge to open economy 14 Hours Ago | 04:23