By James T. Areddy
SHANGHAI -- Three years ago, and three days before the
inauguration of Donald Trump as U.S. president, Chinese President
Xi Jinping won a warm ovation as a standard-bearer for
globalization, welcoming his listeners at the World Economic Forum
at Davos "aboard the express train of China's development."
Today, both the embrace of open trade and prediction of
continuing rapid economic growth have run into a sobering reality:
Besides clashing with the U.S. over trade and economic policy,
China is chugging along at its slowest pace in decades, and
international confidence in Mr. Xi's version of globalization has
"His aura has been eclipsed a bit," says Nayan Chanda, an
associate professor of international relations at India's Ashoka
Mr. Xi has been in a hurry to elevate China's place on the
global stage since he took the helm of the Communist Party more
than seven years ago. Yet many of his efforts to lift China's
economic, political and military influence have failed to win
hearts and minds abroad, even among leaders who oppose Mr. Trump's
"America First" policies and support globalization.
Mr. Xi enjoys key strengths as a globalist. China appears to be
leapfrogging the world in certain next-generation technology like
5G telecommunications, bolstering its engineering talent with state
money. Its 400 million middle-income earners are a new global
business opportunity, whether as tourists or customers, so Mr. Xi
will likely remain welcome anywhere so long as China sustains
The problem, says Mr. Chanda, is that "Xi's globalization with
Chinese characteristics is not the globalization involving free
flow of people, goods and ideas." The Chinese leader, Mr. Chanda
suggests, favors those elements of globalization that strengthen
his position -- specifically China's ability to sell everywhere --
while he blocks those that don't, like the free flow of
Mr. Xi faces challenges at home, too, arising from slowing
economic growth. While Mr. Xi promises a "Chinese Dream" of
national rejuvenation and the building of a strong, modern country
that is respected globally, China last week said expansion of its
gross domestic product in 2019 slowed for the eighth year in the
past nine. The 6.1% pace is the lowest since the early 1990s, when
China's economy was far smaller. Trade battles with the U.S. only
partly explain the economic cooling. Overpriced property,
widespread debt and the effects of a shrinking working-age
population all are taking their toll.
In December, Mr. Xi led a Communist Party economic-strategy
conclave for 2020 that in its postmeeting statement emphasized
economic stability in the face of "a clear increase in risks and
challenges at home and abroad." The statement was notably defensive
and contrasted with bold plans of yesteryear.
Many of the global companies that poured investments into China
for decades are now disgruntled, or downsizing, or both. More
fundamental is the recalibration of the Sino-U.S. relationship
being led by Mr. Trump. Just a few years ago, talks between the
countries included more than 100 simultaneous bilateral dialogues
on issues such as transnational crime and climate change as the
world looked toward a G-2 of the U.S. and China for global
leadership. More recently, the relationship between Presidents
Trump and Xi has largely been pared down to talks over one issue --
hammering out a trade deal.
This month's preliminary trade deal notwithstanding, the abrupt
rethink in Washington is epitomized by U.S. efforts to stymie the
global reach of Huawei Techonologies Co. out of concern that the
telecommunications equipment maker could act as an arm of the
Chinese state, despite the Shenzhen company's rejection of any such
"Today in Washington, engagement is a bad word," says Wu Xinbo,
a U.S. specialist at Shanghai's prestigious Fudan University.
As its domestic economy has downshifted, so has Chinese media
rhetoric touting Mr. Xi's signature international program, the Belt
and Road Initiative, which has been weighed down by mounting
concerns that its playbook -- lend generously to build
infrastructure where others won't -- is a recipe for racking up
debt in poor countries that are unlikely to pay it back.
"There's a lot more talk about the setbacks" of the Belt and
Road Initiative, says Kai Xue, a Beijing lawyer who handles
contracts for the deals.
Similarly, Mr. Xi's international statesmanship -- he typically
visits more than 10 countries annually, frequently with checkbook
in hand -- doesn't appear to have won him trust abroad.
According to polling data from 34 countries around the world
published in December by Washington-based Pew Research Center, 45%
of adults surveyed lack confidence that Mr. Xi will do the right
thing on world affairs.
Pew says many countries are anxious about China's military.
After Mr. Xi marked the Communist Party's 70th year of rule in
October with a parade adjacent to Tiananmen Square that included
intercontinental ballistic missiles, the North Atlantic Treaty
Organization for the first time said it would devote new resources
to monitor potential risks posed by China's military.
Mr. Xi is greeted with particular suspicion by China's neighbors
and Western countries, where Beijing's treatment of antigovernment
protests in Hong Kong and of the Uighur minority in China's
northwest have attracted widespread criticism.
The international skepticism is in contrast to the expectations
after Wall Street's excesses helped pull down the world economy in
2008. Within months, China's government had set a 10-year plan to
position Shanghai as a financial-center rival to New York. Mr. Xi
ran with the idea, successfully lobbying the International Monetary
Fund to designate China's yuan as one of five global "reserve
currencies" and promoting Shanghai's Pudong financial district as a
free-trade zone, promising foreign banks, insurers and brokerages
The result has underwhelmed. The yuan languishes as the world's
eighth most widely traded currency, the free-trade zone has
fizzled, and foreign banks control only 1.7% market share in China,
less than the 2.2% they had in 2008.
Marcus Wassmuth, a veteran banker in Shanghai and board member
of the European Union Chamber of Commerce in China, says "invisible
fences" to expansion, such as unexpected licensing requirements,
make his industry wary of investing more in Shanghai. As a result,
Mr. Wassmuth says: "It's definitely a financial center, but it is
lacking the international."
At home, questions are swirling about Mr. Xi, too, in particular
whether his efforts to revive Communist Party ideology throughout
society are damaging the economy. For instance, he has appeared to
choose political reliability over profits and efficiency as he
throws his support behind government-owned businesses in the form
of subsidies, financing, licenses and pressure on competitors.
Bankruptcies are running higher than ever in China among private
companies, which suddenly have less scope to expand.
On paper, at least, Mr. Xi remains politically
untouchable.Nearly two years ago, the Communist Party eliminated
presidential term limits. That theoretically allows Mr. Xi to serve
well beyond 2023. But just as Mr. Xi's image has been challenged
internationally since Davos in 2017, he also faces grumbling at
"It is precisely because he's amassed so much power and
increasingly wields it with such dictatorial disdain for his fellow
[party] leaders that he's under threat," according to Jude
Blanchette, a China specialist at the Washington-based Center for
Strategic and International Studies.
Mr. Areddy is a reporter in the Shanghai bureau of The Wall
Street Journal. He can be reached at email@example.com.
(END) Dow Jones Newswires
January 19, 2020 18:06 ET (23:06 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.