Global stock markets rose on Tuesday, as a speech from the Chinese president was uncharacteristically conciliatory and raised hopes that the country was willing to negotiate in its trade dispute with the United States.
Speaking at the Boao Forum for Asia in the southern province of Hainan, Chinese President Xi Jinping promised to open his country’s economy to more foreign investment while modernizing rules surrounding intellectual property and easing tariffs on imported products such as cars.
“This year, we will considerably reduce auto import tariffs, and at the same time reduce import tariffs on some other products,” Xi said. “China’s door of opening up will not be closed and will only open wider.”
Xi said Beijing plans to ease restrictions on foreign ownership in the auto industry “as soon as possible” and he also promised to encourage “normal technological exchange” and to “protect the lawful ownership rights of foreign enterprises.”
Many of the promises had been made before in various forms over the years, but his remarks seemed tailored toward U.S. President Donald Trump, who has railed again China’s so-called unfair trading practices since he was elected.
“President Xi’s speech was remarkably designed to conciliate Trump and avert an all out trade war,” said author Michael Pillsbury, who was an adviser to the Trump transition team. “Xi dropped the hot rhetoric of the past week [and] instead, he offered new areas for American investment in China that were previously closed.”
Stock markets responded in unison, with virtually every major global index moving into positive territory.
The Dow Jones industrial average gained more than one per cent, or more than 300 points, to 24,285. The broader S&P 500 was up by about the same amount in percentage terms, to 2,642. The technology-heavy Nasdaq produced a one per cent gain to 7,028.
Gains in Toronto were more muted, with the S&P/TSX composite index up almost 100 points to 15,312. But every sector was higher except health care, which has been gripped with a slow decline in cannabis-related companies that continued on Tuesday.
Meet in the middle
China’s move is the first major rapprochement between the two powers since their war of words began last month with Trump slapping tariffs on Chinese steel and aluminum, followed by tariffs on a suite of other goods.
Beijing replied with a tariff list of its own.
Business groups welcomed Xi’s commitment to reforms, including promises to strengthen legal deterrence on intellectual property violators, but said the speech fell short on specifics.
“Ultimately U.S. industry will be looking for implementation of long-stalled economic reforms, but actions to date have greatly undermined the optimism of the U.S. business community,” Jacob Parker, vice-president of China operations at the U.S.-China Business Council, said.
Jonas Short, head of the Beijing office at Everbright Sun Hung Kai, said the market reacted positively to Xi’s speech because it saw it as an easing of trade tensions, but voiced caution about the likely extent of such reforms.
“China is opening sectors where they already have a distinct advantage, or a stranglehold over the sector,” Short said, citing China’s banking industry, which is dominated by domestic players.
Indeed, even as China reached out with an olive branch with one hand, it was grabbing trade weapons with another, as the country launched a formal WTO complaint over the metal tariffs.