Opportunity
For China
In Wall Street Distress
By Antoaneta Bezlova
08 October,
2008
Inter
Press Service
BEIJING, Oct 8 (IPS) - The Wall Street fire-sale has prompted China economic pundits to call on Beijing to avail of the opportunity to acquire stakes in United States financial institutions and further its influence on global financial power.
From Mexico to South Africa, investors and strategists are calling on Beijing mandarins to step into the limelight and help determine the new set of financial rules to emerge after the 2008 Wall Street crisis.
"China cannot easily afford to pass up such an opportunity," says Chen Jie, professor of economics at Shanghai Fudan University. "We have been anxiously trying to find investment opportunities for our financial capital but before the crisis there existed a myriad of visible and invisible barriers for Chinese investment overseas, particularly in the United States.’’
China should lead rescue efforts for the U.S. financial crisis, Mexican tycoon Carlos Sim, one of the world’s richest men, told the press last week.
"China is now the most important country to help responsibly in this crisis," he said. "In the past, developed countries had reserves and financed developing countries, while today developed countries, especially the United States, are being financed with resources from developing countries".
But China’s response to expectations at home and abroad has been unassuming by far. Although fortified with great liquidity and large reserves, Chinese banks and government investors have preferred to sit on their hands rather than go on a shopping spree of tumbling Wall Street firms.
Chinese politicians have expressed support for the U.S. bailout plan to save banks and arrest the financial turmoil from spreading but stopped short of pledging more than keeping their own financial house in order.
Premier Wen Jiabao summed up China’s cautious position: maintaining "steady and fast growth" is the "biggest contribution" China can make to help the world overcome the current financial crisis stemming from the United States, he said during an inspection tour of Chinese provinces this week.
Chinese bank officials have dismissed as groundless reports that China plans to buy up to 200 billion US dollars worth of US treasures to help Washington combat the deepening financial crisis. In a statement published on the central bank’s website this week, governor Zhou Xiaochuan said the bank views a "stable currency and job creation" as priorities in the current situation.
Some of Beijing’s conservatism stems from the fact that the global credit crisis has walloped the value of the Chinese government’s initial batch of investments in U.S. financial institutions such as Morgan Stanley and the Blackstone Group. In internet forums and the press at home the government has been criticised for taking equity stakes in US financial companies that have nose-dived.
"No one can see the light at the end of the tunnel for U.S. crisis and in view of our past blunders it will be prudent of China to observe more and act less," admonished the "Investors Daily" last week.
Several media outlets have engaged in predictions about the decline of US dominance in world affairs, presenting the demise of Wall Street as a retribution for U.S.’s "arrogance and greed".
"The crisis that befell ordinary American people is caused by the greed of Wall Street bankers," Wang Songqi, financial analyst with the Chinese Academy of Social Sciences, told the China Business Journal.
"The United States is no longer the omnipotent savior and global protector of American values," said an editorial in the Economic Observer. "The demise of Wall Street means that the cornerstone of this global financial empire has been broken and no one knows whether it can be ever repaired".
Officially, few Chinese officials have shared in the European politicians’ criticism of the Anglo-Saxon model of capitalism, which they blame for spawning the global financial crisis.
While embarrassed by the nosedive of its initial Wall Street investments, Beijing has more pressing tasks than assigning blame for the crisis. Chinese policymakers have been racing against time to prevent the country’s economy from slowing too sharply because of global economic forces.
The legitimacy of the ruling communist party rests on maintaining a robust economic growth and providing prosperity to its people. Over the last 30 years of reforms Chinese people have grown richer but not much freer and the country’s rulers have staked their future on efforts to preserve the status quo by fuelling continuous economic growth.
A survey conducted by the Pew Global Attitudes Project this spring found that an astonishing 86 percent of Chinese said they were content with their country’s direction, double the percentage who said the same thing in 2002. By contrast, only 23 percent of Americans polled in the survey said they were satisfied with their country’s direction.
Yet China’s growth -- fueled by foreign investment and exports -- is interlinked to the global economy. Any radical downturn in economic prosperity could undermine the communist party’s chance of holding on to its political scepter. There are already signs of a slowdown. Growth in GDP dropped to 10.1 percent in the second quarter from 11.9 percent in all of 2007.
To counter the fallout, in recent weeks Beijing has made a U-turn on its tight monetary policy set last year to fight overheating and inflation. The government relaxed caps on bank lending and approved new tax breaks for textile exporters, which have been hard hit by weakening demand and rising costs.
Experts anticipate that the forthcoming plenum of the central committee of the communist party would approve even more decisive measures of easing fiscal and monetary policies to prevent the global financial crisis from dramatically slowing down the Chinese economy.
Copyright
© 2008 IPS-Inter Press Service.
