If G8 means business, invite China to the
table By Gary LaMoshi
HONG
KONG - The Group of Eight (G8) major industrial powers
meets this week at Sea Island, Georgia, off the US coast
under a security cloak that includes a
200-square-kilometer exclusion zone for boats. The
isolated offshore setting underscores how far this
summit has strayed from mainstream concerns, and how
badly it needs an infusion of inclusion.
These
exercises in summitry increasingly tend to be wastes of
time. Nothing better encapsulates these leadership
gang-bangs than the Asia-Pacific Economic Cooperation
(APEC) summit's annual photos of presidents and prime
ministers sporting some version of the host countries'
national dress. Nice sarong, Mister President.
At this G8 gathering, Iraq will be a major
agenda item, following a summitry trend since the
September 11, 2001, attacks of shunting aside economic
issues in deference to the US obsession with its
self-styled global "war on terrorism" (see APEC terrorized out
of focus, October 30, 2002). Still, the G8
summit stands out as potentially useful and fruitful
because of its manageable size that nevertheless
includes the world's leading economic powers.
Enter, with invitation, the
dragon It's a great concept, but it won't succeed
until it adds one more key economic player: China. When
these summits began, the world's rich countries still
feared Chinese communists might defeat them with power
emanating from the barrel of a gun rather than
rock-bottom labor costs. Those days are as distant as
the time a Russian leader banged his shoe on a podium,
promising the capitalists, "We will bury you."
The G8 expanded to include Russia less because
of the former Soviet bear's economic standing than from
a desire to show respect and discourage backsliding
toward cantankerous militarism that might threaten the
West. China deserves that same show of respect - to give
it face, as the saying goes, but overwhelmingly for
economic reasons. The world's most populous nation, with
annual growth averaging nearly double digits for nearly
two decades, is on pace to overtake Germany as the
world's third-largest economy by 2010.
Right
now, China rips open four of every 10 bags of cement
made on Earth and clips interest coupons on more US
government debt than any nation except perhaps Japan.
That giant sucking sound you hear isn't US jobs going to
Mexico - as Ross Perot predicted would be the outcome of
the North American Free Trade Agreement - it's
manufacturing jobs from everywhere landing in the Middle
Kingdom.
Agenda bender China's
importance to the world economy has been writ large over
the past year. Its renewed boom after the early-2003
slowdown due to severe acute respiratory syndrome helped
raise the prices of raw materials fueling its industrial
machine and renew the specter of inflation. Oil prices
breached US$40 per barrel under that strain coupled with
China's emergence as the world's third-largest car
market.
Whatever economic concerns take center
stage in the foreseeable future, it's a good bet that
China will be a key player. Take the issue of finding
jobs for the world's unemployed: manufacturers in rival
countries may complain about the impact of Chinese
competition. However, no nation needs to find solutions
for successful worker redeployment more urgently than
China. Recapitalization of the banking system, building
trust in domestic capital markets, nurturing small
businesses, and crafting a viable social safety are
other key challenges facing China where its success or
failure will have major impact on the rest of the world.
More practically, China is already the world's
third-largest trading nation. For oil importers wanting
to engage the Organization of Petroleum Exporting
Countries for lower oil prices; for bridging the gap
between rich and poor on global trade issues (see Trade gets a
martyr, September 13, 2003); or for taking
meaningful steps to ensure the safety of container
shipping, China's actions can make or break the
initiatives.
Slowdown, smoke
scares Perhaps the true scope of China's
influence on the world economy came through most clearly
when its policymakers declared their intent to throttle
back soaring growth rates. Neighboring economies that
depend on China buying great gobs of their exports,
including Japan and South Korea, fell into desperation.
That gloom, combined with possible US interest-rate
hikes, cratered stock markets throughout Asia (see Manic Monday on Asian stock
markets, May 12).
Sure, smoke and
mirrors remain major unproductive components of the
Chinese economy. The government still plays far too big
a role in business. You can't trust the statistics.
Contracts and the legal system remain distressingly
flexible. Central government and local authorities still
fight over turf, banks keep sweeping bigger piles of dud
loans under rugs, and foreign money pours in and exports
pour out at rigged exchange rates. Uncertainty about the
real story in China, and even about Chinese authorities'
true economic and other goals, makes the outlook murkier
still.
Those uncertainties provide the most
pressing reason for the world's other economic powers to
bring China closer to the fold rather than question its
credentials for the admission to their club. To
paraphrase two famous Dons, Corleone and Rumsfeld, "Keep
your knowns close, but your unknowns closer."
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