As global leaders gather today for the economic summit in Washington, D.C., no one could feel the spotlight's glare as much as Chinese President Hu Jintao.
As global leaders gather today for the economic summit in Washington, D.C., no one could feel the spotlight’s glare as much as Chinese President Hu Jintao.
In the weeks leading up to this meeting of the Group of 20 developed and emerging countries, there have been repeated calls for China to take a bigger role in addressing the global financial crisis.
China answered last Sunday with a $586 billion stimulus package that includes infrastructure spending and other measures to bolster domestic demand.
And Friday, Chinese officials confirmed they had offered $500 million to financially ailing Pakistan, calling it “an urgent agreement based on the two countries’ long-term friendly relations.”
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But there probably will be expectations that China can — and should — do more, given that it holds the biggest stockpile of foreign-exchange reserves in the world, nearly $2 trillion worth, and that it looks to be one of the few major economies to show significant growth in the near term.
In particular, British Prime Minister Gordon Brown has urged China as well as oil-rich Saudi Arabia to boost the resources of the International Monetary Fund (IMF).
Japan, which holds the second largest amount of foreign reserves, around $1 trillion, is expected during the summit to pledge $100 billion in loans to the IMF, according to Japanese media.
Although Japan’s economy is ailing, reports suggest Prime Minister Taro Aso is trying to take a leadership role in dealing with the worst global downturn in decades.
“Japan’s move will exert a certain pressure on China,” said Zhang Shenjun, deputy dean of Beijing Normal University’s Institute of Political Science and International Studies.
He said China hasn’t been happy with the IMF, in particular the way nations’ voting rights are assigned, and probably would press for changes in the U.S.-dominated organization before committing to add to its coffers.
A Chinese Foreign Ministry spokesman declined to comment.
Zhang said China has its hands full trying to maintain its own development and growth, which it views as doing its part to help stabilize the shaky global economy.
Its rapid growth in recent years has spurred a boom in commodities and opened new opportunities for many multinational companies.
Friday, a senior Chinese official, adding details to a fiscal stimulus plan that has been compared to America’s New Deal, said a “large part” of the two-year $586 billion package was new money.
China has been running a fiscal surplus and has a cushion in its foreign reserves, exceeding $1.9 trillion as of Sept. 30, up from $819 billion at the end of 2005.
The booming growth has come mostly from the nation’s trade surplus and foreign investments.
Analysts note China’s money has been invested — more than half in U.S. Treasury and other U.S. bonds, and much of the rest in Euro-denominated assets — and it isn’t easy to transfer hundreds or even tens of billions of dollars without causing serious disruption to the market, which wouldn’t be in China’s interest either.
Tao Wang, an economist at UBS Securities in Beijing, says China is helping the global situation by holding on to U.S. Treasury debt. “If it sells it, interest rates would go up and the dollar would collapse.”