Europe's debt crisis: we may need China's money

本帖最後由 norman.ho 於 2011-11-8 03:38 PM 編輯 tvb now,tvbnow,bttvb) o0 \! m( {6 y5 H$ q
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Europe's debt crisis: we may need China's money
If Beijing stumps up a slice of its enormous sovereign wealth fund, it will want something in return
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I don't imagine the communist regime in Beijing is very keen on referendums, do you? Not their style, I'd say. Who cares what China thinks about the feckless Greek government's decision to stage one over its debt bailout package? All of us should care. China is the world economy's No1 creditor nation. We may need its money.tvb now,tvbnow,bttvb+ t) K$ [5 @/ W3 b  t% E- {' K
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This is an extraordinary reversal of global fortune, so extraordinary in such a short time – barely 30 years since the economic dysfunctionality and famine bequeathed by Chairman Mao subsided – that hardly anyone remarks upon it in the current desperate panic.
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President Sarkozy of France says it's just fine to dispatch Klaus Regling, the head of the eurozone's rescue fund, to Beijing to drum up some loans as he is currently set to try to do.9 L+ P/ [# }2 i9 B% p/ F
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But it isn't. For one thing, there's plenty of money in Europe if those holding it would lend it – but they're not persuaded that EU leaders have yet got a grip enough to warrant the risk.TVBNOW 含有熱門話題，最新最快電視，軟體，遊戲，電影，動漫及日常生活及興趣交流等資訊。( n% O* U* [6 w& m4 Z( e0 f

As for China, "you don't get nowt for nowt", as they probably say in rural Manchuria. The signals are mixed, as Tania Branigan reports here. China is not Superman – more Wile E Coyote, in danger of dashing over that cliff, she suggests.5.39.217.763 s# I: s: t! N  ]3 m# y

But if Beijing stumps up a slice of its enormous sovereign wealth fund – the $3,200bn accumulated by selling cheap goods to the rest of the world but not paying its own workers properly – it will want something in return. But what, apart from a restored outlet for its goods?
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Wiser heads than mine have little difficulty in coming up with a few answers. China will want Europe to end its modest support for US efforts to cajole Beijing into allowing its currency, the renminbi, to appreciate, making Chinese exports less attractively cheap.; ^! }+ R% d* ~

Beijing, which denies currency manipulation, has let it creep up by 4% or so, but its trade surplus rises again whenever a trading partner's recovery strengthens, as the US has done – hurrah – in the past quarter.tvb now,tvbnow,bttvb) d! t# @* s+ _$ a2 \; r

Allowing China's own domestic consumption to rise by paying better wages and consuming more of its own consumer output would also help rebalance the world economy for the better. That isn't happening either, though China is engaged in huge infrastructure projects – roads, airports, high-speed trains.tvb now,tvbnow,bttvb* s2 ?1 v( \% r6 Q; h/ O/ i. `# K5 {

Instead, the puritanical communist regime behaves like the other major creditors, Germany and Japan, and purses its lips at those Greeks – who have done just the opposite. They have consumed instead of investing, and borrowed the money to do so. Next door, the Italians have done, too. But hey, Britain has over-consumed and under-invested as well. We're just better placed to resolve our own problems, touch wood.
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What else would the Chinese like in return for a bung? Help in being recognised as a fully-fledged market economy is one thing. Since the Chinese economy is not a normal one – the state rigs markets and contracts are hard to enforce (just like Russia) – that would be as untruthful as saying that Greece's finances justified eurozone membership in 2002. But any loan shark will tell you that debtors can't protest too loudly.公仔箱論壇& t0 d1 X; t4 J7 ?1 O4 ]9 M% E0 G
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Oh gosh. There's lots more. In the Mail the other day, the redoubtable Max Hastings pointed out that China wants access to EU hi-tech weapons exports (there's an embargo still in place) and to civilian hi-tech too. Intellectual property theft from stuff they already buy is a big problem, says Hastings, as of course is cyber warfare, a lot of which appears to emanate from within the People's Republic.TVBNOW 含有熱門話題，最新最快電視，軟體，遊戲，電影，動漫及日常生活及興趣交流等資訊。0 h% m3 Q% J2 ?% g# S% E- Y
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The Chinese have a point when their officials and newspapers lecture Europe for the pickle we have got into. We are collectively their biggest trading partners, so they want us to recover enough to keep buying from them – and they buy German machine tools and James the Red Engine toys (very popular) from us in return.
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But it was the combination of cheap east Asian goods and a cheap credit line to (enforced) east Asian savings (along with lax monetary and fiscal policy at home) that helped get the US/EU into the north Atlantic debt crisis of 2008. China as an ATM machine – it wasn't a smart idea.- a4 i0 Z% o" V0 r
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One can't say too often that the Chinese also have an historic justification in dealing harshly and cynically with the outside world. As every Chinese schoolchild knows, the country endured a "century of humiliation" ("No Dogs or Chinese" signs in the parks) by the European powers – later joined enthusiastically by the US and Japan – through much of the 19th and 20th centuries, when a succession of unequal trade concessions were extracted from weak regimes.
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Unlike many countries, China was just too big to swallow. Then Mao came along. The brute will be better treated than he deserves by Chinese historians for at least reasserting China's independence.
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So the Chinese feel they don't owe us – and, alas, they're right. Washington's political disarray adds to Beijing's mounting sense of superiority, not that China ever quite lost it. Those Europeans have to sort out their own mess, say the emerging economies, Brazil as well as China, who increasingly want the IMF – not the eurozone's own special fund – to handle future loans to our corner of the world. They've suffered IMF medicine in the past: now it's Europe's turn.
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As the G20 meets in disarray in Cannes on Thursday, there is not much to be cheerful about. But there's always something. Larry Elliott points out that George Papandreou may just win public consent for his austerity plans since, as I said here yesterday, even more Greeks (70%) want to stay in the euro than want (60%) to end self-harming austerity. "Greece is now a bigger problem for Europe than Europe is for Greece," Elliott writes.公仔箱論壇, m2 I* p% \# U, c5 k
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Across at the FT, Martin Wolf – one of the most influential economic pundits in the world – makes the same point on a larger canvas. Creditors like China or Germany do have the short-term power to impose their own terms on debtors.

But as the declining dollar and the tottering Greeks remind us, all creditors also have a lot of money at risk if things get worse as a result of their insistence on financial austerity and debt repayment regardless of growth.

It's called deflation and depression. We may yet experience it. But if the creditors accept that virtue is not all on their side – they lent the money to flaky foreigners like credit card companies giving plastic to children – they will more easily accept that they must adjust too and spread the pain.

No point in us all going bust together. It's the only planet we've got. Wile E Coyote, you have been warned.

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