Inside the China Development Forum – key takeaways from CDF 2019

Asia House was delighted to be invited to contribute content for the 2019 China Development Forum, one of the premier platforms for the Chinese government to engage with domestic and international businesses.

Charlie Humphreys, Head of Corporate Affairs at Asia House, shares his thoughts on the forum – and the prospects for ‘Greater Opening for Win-Win Cooperation’.

Key takeaways from business leaders and economists

– Trade balance is not a useful measure of success – the US trade deficit with China is not a sensible reason for a trade war, and attempts to address it are a pointless exercise

– Global trade tensions have had an impact – China has reacted by seeking to speed up reform, and address criticism through liberalisation in areas such as foreign investment

– China’s opening-up continues – maintaining a mix of market-based economic exchange and state direction, there will be a focus on productivity and moving up the manufacturing value chain

– A US-China trade deal will be done, but may not solve many problems – the US may continue to undermine institutions such as the WTO, while there is a global need for China to step up

– High hopes for the Greater Bay Area – this government-led plan for a unique and concrete economy will spark growth across many sectors, not least finance, technology and trade

The 20th China Development Forum

This year saw the 20th edition of the China Development Forum, an annual high-level conference held following the conclusion of the ‘two sessions’ – the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC). Having seen something of a resurgence in recent years, the event is one of the premier platforms (alongside Bo’ao and the more recent Belt and Road Forum) for the Chinese government, via the State Council, to interact with domestic and international businesses.

The forum, organised by the China Development Research Foundation (CDRF), brings together a remarkable array of well-known western business leaders, heads of Chinese state-owned enterprises and Beijing-based Chinese government ministers and senior officials. All together the ‘delegates’ – the eminent persons billed as speakers and commentators in attendance – numbered around 1,000, with approximately another 1,000 business attendees and around 500 journalists, the vast majority Chinese, also in attendance at the splendid Diaoyutai State Guesthouse.

Kicking off with insights on China’s economy from China and the West

The main opening session set the tone for the three days of large plenary and smaller parallel sessions with CEO Apple Tim Cook, BMW Chairman Harald Krüger and US Billionnaire Investor Ray Dalio offering insights on China’s economy from the Western World alongside Yu Bin, Director-General of the Development Research Centre of the State Council (DRC) and Han Wenxin, Deputy Director-General of the Central Financial and Economic Affairs Commission.

David Li, one of Tsinghua University’s top economists gave the big picture overview. The speakers all generally took a long view, using various economic forecasting methods to account for any immediate and short-term reduction in China’s growth, but pointing to longer-term stability and enhancements in productivity levels in the Chinese economy.

Trade balance not a useful measure of success

The topics of the various sessions moved from domestic concerns such as the quality of Chinese growth and increasing social inequality, to international matters such as the global trade regime and the impact of the digitisation of trade. There was clearly recognition from many of the participants that the trade tensions from the US had made a quantifiable impact on the Chinese economy and that decisions had been made to accelerate reforms around investment. China’s new investment laws were regularly cited during the discussions and an example of how China was aiming to respond to criticism from the US.
Many international speakers however, derided the US approach, indicating that the requirement of Donald Trump’s administration that China work to reduce their trade surplus with the US was a pointless exercise – trade balances were not a useful measure of who was ‘winning’ at international trade.

Optimism on easing US-China tension and China growth in the long-term

The potential US-China deal to ease trade tensions was discussed throughout, with a generally optimistic tone from both Chinese and international speakers that a deal could be formed. The opening up of the economy was mentioned regularly throughout the discussions, including further reforms to introduce market-based economic exchange, while maintaining state management of the economy.
There was regular acknowledgement that the trade tensions had already negatively impacted the Chinese economy and some speakers voiced concern over debt levels in China, especially if there was any danger of a major economic slow-down. There was a clearly stated desire on behalf of the State Council to improve productivity in China via more high-tech manufacturing, with a view to continuing to move China up the value chain, thus also bolstering the Chinese economy against potential increase in trade tensions with the US.

The future of the global trade architecture

We were delighted at Asia House to be invited to contribute content for the 2019 China Development Forum. Our contribution, entitled ‘Constructing the future global trade architecture: the role for China and other emerging markets’ was printed in its own volume and distributed to the participants of the forum. The associated session – WTO Reforms and the Future of Globalisation – fostered particularly pointed and frank discussion.

Chaired by Long Guoqiang, Vice President of the DRC, speakers included Pascal Lamy, former Director-General of the WTO and former EU Trade Commissioner; Ning Gaoning, Chairman of Sinochem; Charlene Barshefsky, former USTR and Pinelopi Koujianou Goldberg, Chief Economist of the World Bank. The discussion focused heavily on US attempts to undermine the WTO in order to force China to negotiate with the US on a bilateral basis. The speakers generally thought that the US and China would do a deal on trade, but felt that this would not solve many wider tensions between the two giants. It was also noted that China had an opportunity to play a greater role in the reshaping of the multilateral order, not only in the area of trade, and there were repeated suggestions that China would rise to the challenge. The most notable speaker was Ning Gaoning, one of the key SOE leaders in China. He stated that globalisation in general and membership of the WTO in particular had been extremely good for China and a number of other developing countries. He went on to express significant concerns at US behaviour to undermine the WTO by refusing to appoint appellate judges and suggested that the US may eventually destroy the WTO, which would be extremely damaging both for China, but also for international businesses.

High hopes for the Greater Bay Area

As well as opening up of the economy and reform of inward investment rules, much was made of the government’s strategy for the Greater Bay Area – an initiative to create a thriving economy within an economic zone comprising Hong Kong, Macau and Guangdong Province. The Chief Executives of the Macao and Hong Kong Special Administrative Regions joined the Governor of Guangdong Province at a major plenary session on opportunities within the Greater Bay Area. Their comments covered the development of a number of sectors, especially financial and professional services, tourism, technology innovation and trade in manufactured goods. The overall impression was a government led plan for a unique and concrete economy to develop by connecting the three territories which would encompass international economic links, mainland Chinese productivity and significant infrastructure investment.

I caught up with Carrie Lam, Chief Executive of Hong Kong SAR, after the session and she indicated her satisfaction that she and Hong Kong had been invited to take part at CDF in Beijing for the first time, clearly identifying the occasion as a valuable opportunity to highlight the benefits of HK-mainland cooperation to a key Beijing audience.

Other key topics covered included fiscal policy, global economic developments, the Belt and Road Initiative, Intellectual Property and Innovation, prosperity levels in China, the future of Europe, sustainable development and demographic challenges, among others.