China still feeling vulnerable By Antoaneta Bezlova
BEIJING - Despite China's impressive show of its increased economic and
political stature at the just-finished Group of 20 summit in London, the
country remains doubtful about the sustainability of its economic miracle.
A day before leaders of rich and emerging economies got together in London on
April 2 to chart the trajectory for the hoped-for global economic recovery, a
prominent mainland economist declared on the front page of English-language
China Daily newspaper that China "should not be burdened too much" with bailing
out other countries because it remains more vulnerable to the crisis than many
people believe.
"It is not as strong an economy as some people think," said Tang Min, a senior
economist with the China Development Research
Foundation under the State Council, or China's Cabinet. "China is also a victim
of the crisis. Of the 50 million people who have lost their jobs around the
world, 20 million are in China, more than any other country."
Ma Guangyuan, a research fellow with the Chinese Academy of Social Sciences
suggested that in the view of the depth of the current crisis, China "should
hide its capacities and bide its time" - in line with the advice of the
country's late leader Deng Xiaoping.
"Now it is not a good time to realize our superpower dream," Ma said. "The
butterfly effect of the crisis means that not a single country would be spared
the financial storm. It is preposterous to think that the Chinese yuan would
become a global currency overnight and that China would lead a radical change
in international values."
In the run-up to the London G-20 meeting, China had shown more assertiveness
than before in influencing global decision making. Chinese officials have
demanded a bigger role in the International Monetary Fund (IMF) and other
global bodies, and rebuked the US leadership's handling of the financial crisis
while praising Beijing's own response.
"Facts speak volumes, and demonstrate that compared with other major economies,
the Chinese government has taken prompt, decisive and effective policy
measures, demonstrating its superior system advantage when it comes to making
vital policy decisions," Central Bank governor Zhou Xiaochuan said in remarks
posted on the website of the People's Bank of China ahead of the summit.
The statement appeared just a few days after Zhou published an essay calling
for a new global currency managed by the IMF to replace the US dollar for use
in trade and in storing reserves. At the G20 summit, China lived up to
expectations that it will act in accordance with its increased confidence.
British Prime Minister Gordon Brown, who hosted the summit, said China agreed
to contribute US$40 billion toward the bolstered war chest of the IMF, while
the European Union and Japan would each chip in US$100 billion. World leaders
agreed to boost funds for the IMF and other global institutions by $1.1
trillion.
At home, however, state-sanctioned media downplayed China's contribution to the
fund, preferring to focus on what is perceived here as Beijing's success in
pushing forward the reform of the IMF to reflect better the interests of
developing countries.
"It is a historic summit because it signals the arrival of a new multi-polar
era," Gao Haihong, a researcher with the Institute of World Economics and
Politics under the Chinese Academy for Social Sciences, told Beijing News.
"Developing countries are getting more recognition and their voices are
receiving more attention."
The issue of how much, if any, China should inject into the IMF has been a
sensitive one for domestic audiences fed a menu of mixed news about the
country's strength and vulnerability. Local media have been increasingly
straightforward in reporting the effects of the crisis on China, where many
manufacturing industries have collapsed due to the slump in external demand.
Millions of jobs have been lost and social unrest has spiked all over the
country.
Tang Min insisted that China's biggest contribution to a global recovery would
be keeping the Chinese economy growing and following through on its stimulus
package. "Bailing out China is our most important contribution to the world,"
he told China Daily.
But in contradiction to this, Beijing has at the same time worked hard to drive
home a message about the country's "superior system", one that has managed to
withstand the crisis better than developed economies.
For instance, some financial commentators have admonished US treasury officials
to take a cue from Beijing's reform of its banking system. Burdened with a
mountain of non-performing loans a few years ago, Chinese banks now rank among
the world's top global banks in terms of market capitalization.
"China's banks of today are America's banks of tomorrow," said an editorial in
the China Times this week, pointing out that Washington is following Beijing's
path in setting up an asset commission to absorb "toxic assets".
Not least of the important differences between the US and Chinese banking
systems, however, is Chinese banks are by and large state-owned and follow
fiscal directives from Beijing rather than their own boards.
In another sign of growing confidence, China has publicized plans to transform
its financial hub, Shanghai, into a first-rate international monetary center by
2020. The announcement is part of Beijing's blueprint to expand the reach of
its tightly controlled currency, eyeing the possibility that the yuan may one
day replace the US dollar as an international currency for trade settlements.
This week, Beijing signed a currency swap with Argentina, agreeing to exchange
70 billion yuan (US$10 billion) for use in trade and investment. The agreement
between the two countries effectively eliminates the need for their companies
to buy dollars to pay for transactions.
In recent months, China has signed similar agreements with Belarus, Indonesia,
Malaysia and South Korea.
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