Nov. 4, 2011 (TSR) – Whether the world likes it or not, our global economic situation will be increasingly dominated and defined by the (almost by default) de-facto G-2, China and the United States. The large economic imbalances between the two countries, in which China buys American debt and Americans buy Chinese goods will endure and will be difficult to manage. Before the financial crisis, the co-dependence these imbalances created was a source of stability in Sino-American relations. After the second half of 2009 and especially USA declaring trade war against China this year, it is evident that it has become a source of frustration and conflict. Their dueling protectionism and economic nationalism is the biggest potential medium term threat to China-US relations.
The events of the second half of 2009 – trade disputes, big differences over the way forward on climate change, American charges of Chinese currency manipulation and Chinese agitation for a new global currency to replace the dollar – graphically demonstrate the challenges facing China, the US and the world.
A persistent US trade deficit with China, rising Chinese T-bill holdings, no movement in the dollar–RMB exchange rate, all as the whole economic world was turned upside down overnight by the global financial crisis – it is not surprising that after almost a decade of behind-closed doors softly, softly economic diplomacy, the first half of 2009 witnessed a rising tide of public mudslinging between China and the US. America took the lead, but China was quick to follow on her defense.
G-20 agenda will have to move from crisis response to strategic planning for the global economy. The G-20 will also have to become more institutionalized, but in a way that resembles more the non-executive board of directors of a multinational firm than a management committee of C-level executives. This agenda will include new global financial rules and increased international coordination of national regulations, and reviving an impartial global trade. G20 is literally nothing more than its meetings and post-meeting communiqués. In order to be efficient, they strong chairs and supportive staff. Thus, China and the US will have to be prepared to act as de facto co-chairs against the backdrop of rotating formal meeting chairs and to help build a permanent support infrastructure enabling effective action. The next several years will show if they have the collective will and capacity, provided, of course, USA can be much more honorable in their dealings. China (with many others) is not too excited working with nations who have ulterior selfish motives, rather than helping Humanity as a whole.
The global financial crisis (GFC) was born in the United States due too loose money and too lax regulation, aided and abetted by China’s willingness to provide credit to America seemingly without limit. There is also a culture clash the world does not truly understand: Americans borrow because they are confident about the future, Chinese citizens save for a rainy day. Needless to say, the American debt woes are caused by themselves and using China as scape goat. Instead of saving for a rainy day, they use money they don’t have, thinking China will always come to the rescue.
The G20 is globally representative yet small enough to make consensual decision making feasible. It is the first important grouping to embody China’s major power status, without asking China to play a global leadership role it is not yet ready to embrace.
For China, the G20 represents the leading edge of worldwide recognition of its status as a global power, draped in the less threatening cloth of a broader balancing between the old powers of the 20th century and the rising powers of the 21st century. The G20 is also big enough for the spotlight not to shine too brightly on China, allowing it to grow slowly into a global leadership role it remains uncomfortable about. For the US, the G20 represents a tangible reaching out to the new powers while also serving to lessen the influence of the big countries of old Europe, which seem increasingly not to see eye to eye with the US on a range of global issues. Both China and the US know that they will have de facto vetoes in the G20 without ever having to appear heavy-handed.
The following is the full text of Chinese President Hu’s speech delivered on Thursday at the G20 Summit in the French resort city of Cannes:
Promote Growth Through Win-Win Cooperation
Remarks by H.E. Hu Jintao
President of the People’s Republic of China
At the Sixth G20 Summit
Cannes, 3 November 2011
President Nicolas Sarkozy,
I am glad to come to Cannes to attend the sixth G20 Summit and explore with you ways to counter risks and challenges and promote global development. First of all, I wish to express sincere thanks to you, President Sarkozy, and the French government for the active efforts and thoughtful arrangements you have made for the summit.
Currently, the world economic situation needs our high attention. Some major economies are experiencing economic slowdown, and some countries are facing acute sovereign debt problems. Volatility in the international financial markets persists. High inflationary pressure confronts emerging markets. The turbulence in west Asia and north Africa continues. And extreme weather and frequent natural disasters have also exerted negative impact on the world economy. As a result, the global economic recovery is fraught with instability and uncertainty and encounters growing risks and challenges.
What has happened since the outbreak of the international financial crisis in 2008 shows that we are facing not just an economic and financial crisis. It is a crisis that has exposed certain deficiencies in the existing institutions and mechanisms, policies and approaches, and ways of development. The world economy is now at a crossroads and global economic governance faces arduous tasks. It is imperative that we stand on a higher plane, transcend differences on specific issues, move beyond short-term considerations, and jointly seek ways to overcome the crisis and sustain development. As the premier forum for international economic cooperation, the G20 must continue to demonstrate the spirit of standing together in times of adversity and pursuing win-win cooperation. At this critical moment, the G20 must work to address the key problems, boost market confidence, defuse risks and meet challenges, and promote global economic growth and financial stability. I wish to make the following proposals in this connection.
UNDERSTANDING CHINESE PERSPECTIVE
The dialectical movement of Chinese history that lead to the eventual victory of Maoist socialism, put forward a theory of “three worlds”. According to Mao, the contemporary world consisted of three parts: America and Soviet Union constituted “the first world”, developing countries “the third world”, and countries in between “the second world”. China’s foreign policy was aimed at uniting the third world and befriending the second world so as to form a largest possible united front to fight against the two hegemonic states: the Soviet Union and the United State. China’s resources were mobilized to prepare for an invasion by the two hegemonic powers, individually or jointly.
For the last two decades, China was constantly in fear of being invaded, which, is not entirely irrational. Just look around your 2011 events. Mao’s slogan during “Cultural Revolution” was “to dip caves deeply and store food widely”. China’s global strategy, if there was any, was centered on its own safety. Its leadership was preoccupied with how to react to the conspiracy of imperialism and hegemonism.
Western countries’ arrogance, which was manifested most vividly by the late Secretary of State Dulles’s refusal to sake hands with the late Premier Zhou Enlai, aroused China’s nationalism, the fever of which has lasted, on and off, for more than a century and a half. The motivation behind China’s staunch support for revolutionary movements in the rest of the world was mainly ideological, and had virtually nothing to do with China’s national interest, which, for a long period of time, was a concept rejected with disdain by the then Chinese leadership as being unethical.
There is a huge lack of understanding from the West when it comes to intercultural communication, let alone history.
Due to the fear of falling into the traps set by imperialism and hegemonism, as well as the determination to defend national pride, China’s foreign policy was characterized by extreme cautiousness, sensitivity and defensiveness. China’s foreign policy was largely inward looking but constantly interrupted by outbursts of revolutionary fever.
But the Chinese woke up and learned bitter lessons from the Cultural Revolution in the late 1970s. Under the leadership of Mr. Deng Xiaoping, the Chinese government modified and revised its global view. To prepare the Chinese people for policy changes, the Chinese leadership through the years re-shaped its view of the contemporary era. A pragmatic foreign policy was adopted: Peace and Development.
Since Deng became the helmsman, China’s foreign policy goal shifted towards creating a peaceful international environment that would allow China to concentrate on domestic economic development. Under Deng, China’s foreign policy was characterized by subtle diplomacy and passiveness. The former mantra of “whatever our enemy opposes we shall support, and whatever our enemy supports we shall oppose” was replace by a more relaxed attitude of judging things on their own rights.
Over the years, as a result of the dramatic increase in contact with the outside world and rapidly increased economic strength, China’s attitude towards the outside world has become incrementally more active, open-minded and flexible.
Western countries’ friendlier attitudes also help. The new policy of China is that it is ready to embrace any country on a bilateral basis as long as the country does not support the independence of Taiwan or want to interfere with China’s domestic affairs, which is understandable since they don’t intervene in other nation’s affairs like USA does. Case in point, Libya, Syria, Yemen, et al.
China is very cautious about joining in any multilateral and regional arrangements for the main concern is the fear of infringements upon their national sovereignty.
UNITED NATIONS IS THEIR COMFORT ZONE
The UN is the single most important international organization for China. The membership means the recognition of a country’s legitimacy by the international community. Being the only nation that was democratically voted by the entire world to have a seat at the UN Security Council, China feels that validation of welcome and the veto power makes China feel safe and comfortable.
In the UN, China can find more friends who share its wishes and worries. China respects the authority of the UN, and wishes to strengthen its authority heart and soul. However, it is known in the high circles, China does not want to offend other countries and hence does not want to take a position on controversial issues, which was evidenced by its high rate of absence in voting.
A permanent membership in the UN Security Council makes everyone feel equal such as France and the UK. But outside the UN, these two countries’ influence and status are much lower than the United States. The permanent membership helps the two countries promote their positions in the world. This is why they pay more attention to the role to the UN, as abuse it like they did with Iraq, Libya and Syria. The USA and China pays less attention.
OTHER WORLD GOVERNING BODIES
China has maintained very good relationship with the IMF and the WB, especially with the latter, due to these two international organizations’ sympathetic attitudes towards China’s reform and opening up since the early 1980s. Even during the Asian Financial Crisis, China’s criticism of the IMF was very muted. When Japan proposed the Asian Monetary Fund (AMF), China rejected the proposal for fear of the weakening of the authority of the IMF.
China’s entry into the WTO in 2001 was a watershed in China’s policy toward international organizations and global governance. Their entry into the WTO shows that China has accepted the fact that with the growing role of international economic organizations in world economic affairs, state sovereignty is under increasing erosion. The role of supranational world economic organizations will be further enhanced in the 21st century and sovereign states will have to accept the arrangements and arbitration made by international organizations in many aspects. Sadly for those of who know some people’s ulterior motives against China, she is moving towards the direction of preparing to surrender a certain proportion of sovereignty in exchange for the world peace and prosperity as well as its own long-term interests.
In terms of regional cooperation, the Asian-Pacific Economic Cooperation (APEC) is the first regional economic arrangement that China has actively participated in.
There are two different approaches towards the nature of APEC. The first approach is that APEC should be an institutionalized and exclusive economic arrangement that is based on binding treaties, rules and regulations. The second approach argued that APEC should be an open, voluntary and flexible forum based on mutual respect, reciprocity and equality. Faced with strong opposition from ASEAN and other Asian countries, America, who likes to control everything, had to give up the intention of making APEC a “community”.
Due to the fundamental differences between America’s wishlists and the majority of Asian countries, APEC failed to produce anything important in the area of trade liberalization,such as stabilize the Asian economy when the Asian Financial Crisis struck. But China has always been a gracious world player and despite organizational failures, China is still very positive about APEC (and everyone).
The most important rational behind China’s positive attitudes is the fact that APEC as a forum has provided leaders in the region good opportunities to meet and become acquainted with each other. This window of opportunity for leaders “to agree to disagree” is precious. China likes the rational civil diplomacy based on Confucian principles.
Over the past two decades, China maintained an average annual growth rate of more than 9 percent. Consequently, China’s economic strength increased dramatically. During the Asian Financial Crisis, China’s policy of non-devaluation made a great contribution to the stabilization of the Asian economy. In recent years, China has become one of the few important engines of economic growth of the world economy.
While being courted to become part of G8, China’s attitudes toward G7 have gradually changed. For a very long period of time, the Chinese government was satisfied with watching what the G7 were doing without fanfare. For them, the G7 is just a forum of rich countries and not a global regime with legitimacy of enforcement that is recognized by sovereign governments of the rest of the world. They also did not think it could have any influence on what the G7 was going to do and that G7 could not do anything about China either: the G7 was not the UN nor could it draft any binding international agreements. Moreover, China was not amused by the G7’s lectures on its domestic issues. However, China’s reactions to the comments were mostly conciliatory, like they always do. The Chinese are not confrontational people like the West. They like doing things privately and dignified, and prefer not airing dirty laundry publicly. It is ingrained in their culture and the West cannot force them to change. America likes to make everything sound like a tabloid Hollywood gossip. The Chinese do not like such displays.
CHINA IS VERY MISUNDERSTOOD
If China is misunderstood, it is because the West does not want to meet them halfway, culturally at the basic level. As mentioned above, there is a huge gap within the intercultural communication. I have worked with all sort of nationals, and China is very subdued. As a public speaker, I can give free advice to the Americans: Do not do so much hand gestures. Put your hands on your side. But Americans do not understand the Asian culture very well. They always impose their own culture to others. The Americans seem to always presume they know best, when they are a very young nation compared to China. It’s a matter of real civil diplomacy.
Being a country that is still in the process of transformation, China will and must continue to concentrate on its Herculean domestic problems. China will and they do listen to outside criticisms in a cold-minded manner. China always strive to improve its human rights record for the Chinese people and only appreciate those criticisms that contain no hidden political agenda.America always have this. (We will tackle all the uprisings and their roots, which will explain why China gets frustrated with the West). Chinese intellectuals who experienced systematic human rights abuse in person during the Cultural Revolution cherish human rights no less than anyone else in the world. They have experienced a lot of wars and atrocities within their own borders for centuries. What is fascinating is that America has the world’s record for human rights abuses and with the recent murder of Gaddafi, they are not held accountable. Yet, peg China, who was given high remarks by the UN Office of Human Rights for their human rights records together with Iran, as the country with such evil leadership as the Western propaganda always portray them when it is very far from the truth.
The Western mainstream media, the obvious mouthpiece of America, always prey to the majority of the masses who do not know much about China, and thus prey on the fear of the unknown. China is much move civil than the West. Confucius came from them, remember?
China has its own reform agenda based on China’s painful history experience. China needs foreign help but not foreign interference. Democracy? In whose terms? USA? Like they did in Libya and Kosovo illegally and criminally? China has every right to do what they need to do for their country. It is their sovereign right.
True, China’s role in the world affairs is no longer ignorable. But she does not want to be intrusive to an exclusive club consisting of so-called “like-minded people” nor want to bear the responsibility that is not its to bear. China takes her time to familiarize itself with various international mechanisms. If anyone knows how a Chinese thinks in terms of business, they think very long term and do not jump into anything without weighing everything in their Chinese abacus. I learned that since I was a child when dealing with them.
For China, the international order is based on the consensus of sovereign counties. Bilateral and multilateral agreements and treaties between sovereign countries are the most important ingredient of the international order. The sovereignty of a national state is inviolable.
Chinese leaders are also not interested in attending lectures or showing its solidarity with the rich and powerful to gang up on the less rich and less powerful. Typical of Asian culture, they do not have the habit of being an uninvited guest to anywhere.
On the other hand, if a forum cannot produce anything significant and fails to be relevant in dealing with important global or regional issues, member countries like China will loose interests in the forum. Fatigue will set in and people will be bored attending the meetings, and the public will lose interest for the meetings. Certainly, no one wants to join a party that is mostly catering to USA and Israel.
Right now, we have serious global problems that cannot be ignored and China spends a lot of her time thinking how to salvage multilateral trade talks, how to stabilize the exchange rates of the key currencies, how to reform the international financial architecture, how to alleviate poverty and narrow the even widening gap between the North and South, how to promote regional trade liberalization, how to implementing the Kyoto Protocol, how to have harmony, peace and common prosperity for all Humanity and so on. Not join a club for club’s sake because they want to be cool. China is not entirely too happy about how Libya was dealt and saw the abuse and violation of France, UK, USA with NATO.
The world is suffering from the poverty of thoughts, morals and honor; only constructive impartial debate can create a fulcrum so that the earth can be moved.
AUTHOR: Lady Michelle Jennifer Santos, Founder & Publisher