G20 SUMMIT:THE CHINA the world will see at the G20 summit is going to give people a shock – the most populous country on earth, brimming with confidence and with its coffers full, keen to flex its new political and economic muscle by translating its potential demand into influence.
China has dominated the headlines in the run-up to the meeting of the world’s 20 largest industrial and developing nations. Premier Wen Jiabao said earlier this month he was “worried” about China’s $740 billion worth of investments in US Treasury bonds because of the state of the US economy, and Beijing leaders, boosted by tentative signs their four trillion yuan (€450 billion) spending plan might be working, have wasted no opportunity to chastise the West for allowing spending to get out of control in comparison to high-saving China, only to have nothing left when the rainy day finally arrived.
This hectoring tone has translated into calls for fundamental reform of global financial supervision and also for the rest of the world to do as China has done – spend more on stimulating growth.
Beijing didn’t stop there, suggesting that there ought to be an alternative reserve currency to the dollar – perhaps the world could move to greater use of International Monetary Fund (IMF) Special Drawing Rights instead?
China’s economy has slowed considerably on the back of dying export demand, but it is still expanding. Combined with calls from Beijing for a bigger say in the IMF and other international financial bodies, this is not a bowed, post-communist developing country, but a strong, post-Olympic nation with designs on being a superpower.
The dollar is unlikely to be replaced as a global reserve currency because of China’s urging, but there will be a debate – Beijing is ignored at one’s peril.
The EU is China’s biggest customer and EU commissioner Benita Ferrero-Waldner met foreign minister Yang Jiechi and vice-premier Li Keqiang as she tried to mend bridges damaged by Beijing’s fury at French president Nicolas Sarkozy’s decision last year to meet the Dalai Lama.
As the Chinese government points out, Chinese companies went on a €10.5 billion shopping trip in Europe in late December.
While Ferrero-Waldner said she didn’t think London was the ideal platform to discuss China’s calls – more of a job for the IMF – she acknowledged China’s growing influence.
Dealing with Tibet is a knotty political issue. While this will be a summit focusing on the economic, things are always political in a single-party state like China. The Communist Party rules alone, and while it does not have to worry about winning elections every four or five years, it does have to worry that civil unrest because of the slowdown could translate into political upheaval.
“Through the G20 summit, China has started to take part in international fiscal and financial decision-making, a crucial step on to the international stage,” said Yuan Gangming, a researcher with the government think-tank, the Chinese Academy of Social Sciences.
There are early, possibly premature, signs of recovery – new yuan loans extended by Chinese banks in March could reach nearly 800 billion yuan, up from less than 300 billion yuan a year earlier, and purchasing managers’ data is also ticking up. Fixed asset investment is rising strongly because of the stimulus plan, and the stock market is performing well. However, Chinese growth remains in the balance.
“You know it still very much depends if this global financial crisis reached bottom,” central bank governor Zhou Xiaochuan said at a meeting of the Inter-American Development Bank this month.
The Chinese are also happy to see different power blocs emerging globally. Zhao Xijun, finance professor at the Renmin University of China, has suggested the BRIC nations (Brazil, Russia, India and China) might choose to take a different stand from developed economies.
