must seek its own way of struggle according to its historical conditions.
Nor does China maintain a foreign policy of exporting revolution to other
countries that do not want a revolutionary path. China has formally declared
its determination never to seek hegemony and has openly declared a policy of
no-first-use of nuclear weapons. Brzezinski's G2 strategy runs counter to Deng
Xiaoping's strategy of "hide capacity, bide time" (tao guang yang hui),
also translated as "hide brightness, nourish obscurity" - a strategy of keeping
a low profile to avoid attracting unnecessary hostility in a period when the
world's sole remaining superpower was intoxicated with
imposing its will on other countries by its overwhelming military power.
A G-2 regime would inflict on China the side-effects of rising anti-US
sentiments from around the world at a time when US power is declining from
self-inflicted wounds.
If the G-2 is patterned after G-5, then there is no geopolitical purpose for
China to become a partner, because the G-5 is a tool of US hegemony and
neo-liberal imperialism. Unless the G-2 is based on true equality between the
partners, which is unlikely as the power disparity between the US and China is
still too wide and at any rate not possible without a new just world order,
then the cost for China from being a member of G-2 is too high and the benefits
negative. By being a member of the proposed G-2, China would be necessarily
saddled with the burdens of being a special ally of a superpower without the
benefits or even the need of being a superpower itself.
China and Asia
In the long run, Chinese foreign policy should stay on track with nonalignment
and be on the side of developing countries and oppressed peoples. A G-2 will
create unavoidable geopolitical problems for China in Asia, and also relating
to the US global war on terrorism. It will exacerbate China's problem with
Islamic separatists, who if devoid of US instigation and support would be a
problem of infinitely less complexity than the US global war on terrorism.
China's first priority should be to secure her position as the leading
protector of Asian interests against neo-imperialism from the G-5.
Anti-imperialism does not need to be associated with anti-Western xenophobia if
the West would abandon residual imperialist policies. A strong China needs also
a strong, independent Asia free from undue manipulation by external forces.
China must not make the same mistakes as Japan did in allying itself first with
imperialist Britain and then fascist Germany against other Asian countries,
leading eventually to World War II.
China needs to do everything it can to improve Chinese-Japanese relations, even
to the extent of appeasing Japanese national interests. China should reverse
the past policy of tilting toward the US with undignified concessions while
adopting an antagonistic posture toward Japan. China should tilt towards Japan
as a friendly neighbor and not fantasize about unrealistic US friendship with a
socialist China. It France and Germany can be members of the EU to their mutual
benefit, there is no reason why China and Japan cannot be symbiotic partners in
a united Asia.
Asymmetrical observance
The celebration of the 30th anniversary of US-China diplomatic relations was
held only in Beijing. In the US, no one cared. Obama's inauguration speech is
indicative of deep-rooted US national psyche in which he sees the US as a holy
defender of the world against fascism and communism, as if the two were one
equal evil. China needs to be prepared for the penchant on the part of US
Democrats for tough China-bashing policies in trade and human rights.
Early indications suggest that the Obama team will likely not be able to revive
the US economy within the four years of its first term and China may become the
convenient scapegoat for US policy failure. Chinese policymakers will be
disappointed if they are not realistic about deep-rooted US hostility toward
China. China must avoid open conflict with the US, but Chinese policymakers
must understand that the US will never be China's friend as long as the
communist party is in control of China.
Secretary of State Hillary Clinton's overture of peace and cooperation to China
is merely an emergency measure in response to a collapsed economy and
exhaustion from undeclared foreign wars. China should welcome this pragmatic
gesture of realpolitik friendship from the US but not be lured into
geopolitical complacency about a fundamental change in US foreign policy.
Just as China had been lured into market capitalism at a time when market
capitalism was rushing towards its final phase of self destruction, China now
needs to carefully consider any disingenuous invitation to join and save the
precarious US-constructed and dominated world system at a time when conditions
around the world are making the prospect of a new, just world order on the
horizon a welcome possibility.
It is true that the current financial/economic crisis is a global problem and
can only be solved with global cooperation. It is also true that the crisis was
created by the US. It is however, far from clear that the solution can come
from discredited US leadership to restore a broken world order to its
pre-crisis ways.
Obama's change
The Obama policies on economic recovery and foreign relations have so far been
more business-as-usual than real change, despite the president's populist and
optimistic rhetoric of hope and change. Even Lawrence Summers, director of the
White House's National Economic Council, admits the economy will be in for a
rough time for a while and that unemployment will continue to rise even with
the massive stimulus package. Treasury Secretary Tim Geithner has failed so far
to exert any bold leadership. There are reports that the Treasury Department is
having difficulty staffing up key positions because of the Obama
administration's strict vetting procedures.
Geithner's three-part program for tackling the credit crisis appears stalled
for details as the Treasury Department suffers from vacant offices at the
undersecretary and assistant secretary, The program's steps are: 1) Inject
fresh government capital into some of the country's biggest financial
institutions; 2) start a program of up to US$1 trillion to promote new lending
to consumers and businesses; and 3) establish a toxic-debt fund.
Details of the toxic debt fund have still not been fully released to the
public, leaving unresolved a key challenge in the competing incentives in the
proposed partnership between the public and private sectors. Distressed-asset
investors typically want the cheapest possible price to protect their returns
on investment. However, sales at such low prices would result in further large
write-downs for banks and potential failure of some, something the
administration wants to avoid.
Many economists are pointing out that the Obama bailout plan for distressed
banks is too small for the scale of the problem, that taxpayer money is being
misdirected to save banks without adequate control on the banks as to how to
use the money to help the injured public, and that it is a hybrid solution that
combines the worst aspects of nationalization and the worst aspect of private
enterprise without the benefits of either.
Government efforts to buy toxic assets and spur bank lending may not work,
according to a study by three economists. The study, "The Pricing of Investment
Grade Credit Risk during the Financial Crisis" by Joshua Coval and Erik
Stafford of Harvard University and Jakub Jurik of Princeton University suggests
that recent credit market prices are "actually highly consistent with
fundamentals", and that bonds and credit derivatives should have experienced a
"significant repricing in 2008 as the economic outlook darkened and volatility
increased".
The analysis also confirmed that the "severe mispricing existed in the
structured credit tranches prior to the crisis and that a large part of the
dramatic rise in spreads has been the elimination of this mispricing." The
authors conclude that any use of taxpayer money to buy toxic assets "will
simply transfer wealth to the current owners of these securities". This
conclusion has been independently reached by a large number of market
participants in the past two years.
As part of Treasury's wide-ranging effort to restore stability to a banking
sector hit by huge mortgage-related losses, coupled with a public-private
program to buy toxic assets from banks to clear the way for banks to attract
private capital, 19 of the country's largest banks will be subjected to stress
tests by regulators to determine whether they can weather aftershocks and
future shocks. The Treasury is planning to delay the release of any completed
bank stress test results until the first-quarter earnings reporting after April
24, 2009 to avoid complicating stock market reaction. Discussions are
reportedly on-going about how the results of the regulatory stress tests on the
19 largest US banks will be released, possibly as summary results that are not
institution-specific.
"Frankly, we don't have as accurate an assessment of the situation of a number
of institutions as we'd like to because we haven't really done the stress test
against a range of scenarios," admits Summers, who as Treasury secretary in the
Bill Clinton administration cannot escape responsibility for the current
crisis. He did not rule out the possibility that some banks might be shut down
as a result of the stress tests. "When supervisors deem it appropriate, then
institutions are intervened," he said.
In other words, the administration's top economist still does not have a handle
on the scale of the banking crisis almost two years after the crisis began in
July 2007. US banks have written down $758 billion in credit losses since the
crisis began and have warned of more losses to come, though no one in or out of
government can say how much more.
Rescue by changing accounting rules
The American Bankers Association asked the Securities and Exchange Commission
on October 13, 2008, to override new guidelines on mark-to-market accounting,
saying they inaccurately reflect distressed asset values over the longer term.
The once-obscure accounting rule that had upset bankers who blamed it for
exacerbating the financial crisis was changed on April 2, 2009, to give banks
more discretion in reporting the potential value of mortgage securities. The
move compromised the independence of the Accounting Standards Board (FASB),
which was widely viewed as having yielded to intense political pressure. FASB
chairman Robert H Herz said he voted for the change because the new disclosures
would help investors.
The change will allow banks to report higher profits by assuming that
securities are worth more than anyone is now willing to pay for them in the
open market. Banks are allowed by the rule changes to keep some declines in
asset values off their income
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