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| ublished July 7, 2009  | ||||||||
| Europe drags feet as China continues to rise - as usual
By SHADA ISLAM
CHINA may or may not use the upcoming Group of Eight summit in Italy to call for a rethink of dollar-dominated global currency reserves. But - with the possible exception of US President Barack Obama - count on Chinese President Hu Jintao being the undisputed star of the show. G8 participants opened up one session of their annual summit to leaders of five key developing countries, including China, several years ago. The encounters produced little of worth, however. Not surprisingly, press coverage of the 'phantom presence' of the emerging world leaders was minimal; their G8 counterparts, meanwhile, basked in the limelight as they dealt with the serious business of managing the world. No longer. The G20, composed of key developed and developing nations, has overtaken the G8 as the most relevant forum for a discussion of global economic challenges. And, whether the talk is of currency reserves, climate change or world trade, all eyes are on China as the key to reviving global growth. Renewed calls by top Chinese policymakers in favour of a new global reserve currency to replace the dominant dollar shook the world financial system in the run up to the G8 meeting. Beijing has warned against the US against 'green protectionism' and as Chinese exports continue to rise while the country enforces a 'buy China' directive at home, American and European anger at their rising trade deficits with the Asian economic giant will grow. So is the stage set for confrontation rather than cooperation between an increasingly confident China and Western nations struggling to come to terms with Beijing's economic clout? Since China will continue to grow - albeit at a slower pace - the answer depends not only on Beijing's conduct, but on whether the US and Europe can adapt to a new world order, argues Jan Willem Blankert in a refreshingly counter-intuitive book China rising: will the West be able to cope? (2009, World Scientific Publishing.) Instead of lamenting over the competitive threat posed by China, fretting over trade deficits and crying over lost jobs, the US and the European Union should put their own house in order. The onus is on Washington to increase domestic savings, upgrade the national education system by making it more inclusive and encourage workers at the lower end of the production ladder to embrace rather than fear technological change. The EU, meanwhile, should stop harping on its rising trade deficit with China: The 27-nation bloc's overall global trade figures are more or less in balance; the increase in Chinese exports to the EU is largely the result of investments by European, American and (non-Chinese) Asian companies; and whether EU policymakers admit it or not, access to cheap Chinese inputs may have allowed European manufacturers to stay competitive and kept inflation in check. Competitiveness begins at home: what is required for economic progress is productivity growth which is 'a domestic matter,' says Blankert. Even as they berate China to increase domestic consumption and rein in exports, US and EU policymakers should remember that 'it is not so much China and globalisation which form a threat to unskilled labour (in the West) but that today's labour has to cope with technology. Steelworkers have to be able to work with computers. This requires knowledge which requires appropriate long-term government policies,' he argues. Controversially, given Europe's current anti-immigrant mood, the book also underlines that if countries like Germany are to keep producing and exporting top-quality products, they will have to accept the immigration of high-quality foreign labour. Whether the US and EU governments are in a mood to take such advice is a moot point. While Europeans fear being excluded from a so-called 'G2' bringing together the world's largest and the fastest growing economies, Washington is still assessing the political fall-out from its financial and monetary entanglement with China. Chinese policymakers bemoan the EU's refusal to lift its 20-year old arms embargo on China and Brussels' continuing reluctance to give Beijing full market economy status. Meanwhile, EU officials are torn between taking a tough line on issues like human rights, convincing China to adopt stricter climate change standards and dealing with Beijing as an equal - and indispensable - partner on issues like Iran, North Korea and Burma. President Hu Jintao's comments at the G8 will further spotlight China's global role. But don't expect Western confusion on dealing with China's rise to be resolved anytime soon. | ||||||||
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