China’s third plenum, a meeting of the Central Committee, the top governing body of the Communist Party, is expected to be held from July 15-18 at the Great Hall of the People in Beijing. Photo: Bloomberg
Opinion
Dominque Turpin
Dominque Turpin
A pro-business third plenum is China’s best retort to US, EU gauntlet
Faced with difficult EV negotiations with Europe and the possibility of a Trump return, strong pro-business signals from Beijing now would help
China finds itself at a crossroads – after many years of the government recognising a structural imbalance in the Chinese economy, there does not seem to have been a definitive solution found. China wants to boost its economic development and the third plenum should give us some important clues as to which way it intends to go.
The government’s top priority is social stability and for that, economic growth is key. I believe that bolstering the role of the private sector and creating conditions for entrepreneurship to flourish can be of immense benefit to China’s economic development.
I think we will see a repeat of what Premier Li Qiang said at the 15th Annual Meeting of the New Champions by the World Economic Forum in Dalian recently about giving more space to the private sector to innovate, and providing more support for foreign investments in China.
For China to continue its robust and open economic interaction with the rest of the world is in everyone’s interest and hopefully the third plenum’s outcome can show signs of travel in that direction.
Signs of some of the headwinds China faces as it prepares for the third plenum were in evidence at the Dalian forum. There was a noticeable lack of Western engagement and this was unfortunate.
The World Economic Forum is a well-established and influential forum to tackle pressing key global issues and for those who stayed away, it is a missed opportunity. It seemed to me there were fewer international participants in Dalian this time. There were fewer of the usual big corporate executives we usually meet in Davos, Switzerland.
World Economic Forum founder and executive chairman Klaus Schwab (from left), China’s Premier Li Qiang, Poland’s President Andrzej Duda and Vietnam’s Prime Minister Pham Minh Chinh at the opening ceremony of the Annual Meeting of the New Champions in Dalian, in China’s northeastern Liaoning province, on June 25. Photo: AFP
As the European president of a joint Chinese and European business school, I know from experience how vital it is to create a neutral and credible communication channel between China and the outside world. More dialogue is needed in times of tension. China will always play a hugely important role in world affairs, tensions or not, so I hope any reservations about attending in future can be put to one side for the sake of constructive dialogue.
Meanwhile, China’s dispute over electric vehicles (EVs) with Europe has the potential to create more friction, and thus underlines the necessity of maximising people-to-people contact. Negotiations continue between China and the European Union over EV tariffs and these are likely to take several twists and turns before the final outcome. The picture is highly complex because it is closely intertwined with geopolitics.
For example, America’s decision to impose a 100 per cent tariff on Chinese EVs creates a gap in the US market and opens up opportunities for countries with closer relationships, such as Japan, which has the capability and ambitions in the EV sector. Honda is on the verge of opening an EV plant in Canada and this could signal the start of a trend for Japanese and other foreign EV makers to invest in production facilities in North America.
I don’t have any predictions on who might be next to impose tariffs on Chinese EVs, but I am concerned that the EV dispute between China and Europe could put the World Trade Organization’s role and relevance under unprecedented scrutiny and pressure unless a satisfactory solution is found.
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Chinese-made electric vehicles face additional EU import tariffs of up to 38%
Chinese-made electric vehicles face additional EU import tariffs of up to 38%
Due to the complexity of the issue, such an outcome looks challenging to achieve. Cars can be emotional products and this is a political time in Europe and North America. It is too easy for politicians to try to win votes by saying they are protecting manufacturing jobs – the influence of domestic politics cannot be underestimated.
Yet I do not believe this issue is quite so urgent since the number of Chinese EVs sold in Europe and North America is quite small. The impact is likely to be that more Chinese EV companies will decide to produce cars in Europe – and this is already happening with BYD’s factories opening in Hungary. What is happening today is a repetition of the 1980s when the Japanese were challenging the European and US car industry.
It would be timely for China’s third plenum to put out positive signs ahead of the US presidential election later this year, which could see Donald Trump return to the White House. Many describe the former president as an unpredictable character and in the event of his election victory, the US-China relationship is likely to suffer.
I fear that anti-China rhetoric during the election campaign will reach a crescendo in the coming months, creating friction. But this would be well anticipated by all sides so the impact is likely to be kept within reasonable limits. Elsewhere, as we can see, Europe is preparing for a possible Trump victory on several fronts.
The relative continuity that a victory for Joe Biden would bring is likely to be the preferred outcome for most European businesses and governments, as well as, one would imagine, much of the business world in general.
Dominque Turpin is European president at the China Europe International Business School
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