Tue. May 24th, 2022

Chinese President Xi Jinping has called on nations to secure global supply chains and prevent inflation shocks as the leader of the world’s No.2 economy seeks a smooth path to clinch a precedent-setting third term in power.

“We must address several risks and promote the steady recovery of the world economy,” Xi told the World Economic Forum via video link on Monday, the third time the Chinese leader has addressed the opportunity.

“The global industrial and supply chains have been disrupted,” he added. “Commodity prices continue to rise. Energy supply remains tight. These risks exacerbate each other and increase uncertainty about the economic recovery. “

An energy crisis in China’s border nation Kazakhstan led to Russian troops deploying earlier this month to help stem a public uprising, which brought supply chain risks to Beijing’s back door. China seeks to minimize economic and diplomatic instability as Xi prepares to retain power at the ruling Communist Party’s leadership congress in the second half of this year.

Xi also warned about global inflationary pressures and the consequent effects of higher interest rates.

“If large economies apply the brakes or take a U-turn in their monetary policy, there will be serious negative floods,” he said. “They will present challenges to global economic and financial stability, and developing countries will bear the brunt of them.”

As for China’s economy, Xi has eased concerns, even after data showed on Monday that growth slowed to 4% last quarter, the weakest pace since early 2020.

“The fundamentals of the Chinese economy are unchanged – it remains resilient, has sufficient potential and its long-term outlook is positive,” he said.

‘Economic challenges are real’

Angela Mancini, a partner at Control Risks Group Pte in Singapore, told Bloomberg TV on Tuesday morning that Xi had avoided spelling out the risks his government was facing to a world audience.

“While it is anticipating China’s economic growth, and it has indeed had more than 8% growth last year, that growth is slowing down and the economic challenges are real for China,” she said.

“And they also have demographic challenges and they’re trying to pursue a zero-covid policy,” she added. “They actually have a lot of challenges that he probably does not want to highlight too aggressively in such a speech.”

Xi called for coordination on global economic policy, just as China and the US differ on key policy steps. China’s central bank lowered interest rates on Monday for the first time in almost two years, while the US Federal Reserve indicated interest rate hikes in coming months.

“We need to coordinate the targets, intensity and rhythm of fiscal and monetary policy and large developed countries need to control the spillover effects of their policies to avoid shocks to developing countries,” Xi said.

Indian Prime Minister Narendra Modi and German Chancellor Olaf Scholz will also speak at the virtual event, which takes place from 17 to 21 January. While the summit usually attracts the global elite to the Swiss ski resort of Davos for a week of struggling, it has shifted online over the past two years due to pandemic restrictions.

Xi became the first Chinese head of state to address the forum in 2017, days before Trump’s inauguration as US president. He warned at the time against a trade war and condemned protectionism, only for Beijing to get involved in a tariff deal with Washington.

Last year, Xi used the WEF to appeal to the world to avoid an “outdated Cold War mentality”, as he indicated that China would forge its own path, despite Western criticism, which set the tone for Beijing’s relationship with the Biden administration.

Xi also reaffirmed on Monday that China welcomed “legal” foreign investment, which sent a positive signal to investors after a year of severe repression of sectors including major technology, education and entertainment.

“All kinds of capital are welcome to work in China in accordance with laws and regulations and play a positive role for the development of the country,” Xi said.

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