FT launches China blog
Financial Times launches new blog focussed on China. Adam notes that the FT has a new China blog, called Dragonbeat. Posts are expected to be at least weekly.
The first post begins:-
The global financial crisis poses two challenges for China: one of domestic economic management and another of international economic diplomacy. How it addresses these two challenges will in large measure determine whether China takes up what it considers to be its rightful place as one of the world’s leaders, or subsides instead into a Japan-like irrelevance despite the size of its economy.
The post author discusses a number of key issues facing China, problems in the domestic economy and why despite a desire to sit at the top table it may not obtain one, until it faces up to some realities, as the final paragraphs indicate.
But the hard fact is that China’s US$296bn trade surplus, and its US$2,000bn foreign exchange reserve wallet, are creatures of the same debt-fuelled consumption that Premier Wen denounces. The fallacy of conceiving of international economics as a morality play is that it is impossible for everyone to run a surplus. The supposedly virtuous thrift of savers is made possible only by the profligacy of spenders. A “virtue” that cannot exist without the “vice” of others is no virtue: it is simply one side of a trade.
China’s unwillingness to face up to this fact means that it actually has a strong interest in preventing a serious discussion of a reorganised global economic system. This is because any such discussion would probably have to consider – as a counterpart to measures constraining the ability of the US to abuse its reserve-currency privilege – some variant of a sensible proposal that John Maynard Keynes made during the Bretton Woods discussions of 1944-45: a tax on countries that insist on running big current account surpluses.
So both because it lacks technical tools, and because it has a strong interest in preventing a crucial point from being raised, China is unlikely to make a substantive contribution to the reorganisation of the world’s economic system. Its strategy will be to pony up a bit of cash and score a few political points, but otherwise sit back and hope that order can be restored so that it can continue selling its goods, and stretch out the painful transition to a more domestically-driven and consumption-oriented economy over as long a period as possible.
Read the whole post. Indeed for anyone interested in the NZ China FTA, Adam suggests reading Dragonbeat regularly might well be a good idea.
If China wants to be taken seriously and be a real global player, she will have to remedy the problems identified.
