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Global Financial Crisis-Changes, Expectation and EffortsJoint Interview of Chinese Press in London with Ambassador Fu Ying
2009/05/18

 

The Wall Street financial crisis has been around the world for over a year. Scholars seem to agree that the world is undergoing the worst ever economic crisis since 1929. The World Bank projected a first-ever global contraction since the Second World War with dramatic decline in global trade and investment. As an IMF chief official said, all of last year's pessimistic observations of the world economy seem to be over upbeat for this year.

Extensive as its impacts are, the crisis also denotes profound changes in the international system. In this process, the change of China and China perception are even more prominent.

If we compare how countries perform and how governments respond in this financial tsunami, we can see a growing interest in information from China and in the country itself.

A China that is integrated in globalization cannot remain immune from this global crisis. Indeed, its economy has been severely affected. And the Chinese government is facing domestic and external risks and challenges unseen in history. A British reporter noted in the "Two Sessions" (the annual sessions of the National People's Congress and People's Political Consultative Conference) coverage that after watching Premier Wen Jiabao's press conference on 14 March, he felt that the Premier was both soberly aware of the challenges facing the country and people, and fully prepared for the measures to be taken.

Last year China grew by 9%. This year, when the Western economies are suffering from negative growth, the Chinese government set out a growth objective of around 8%, a figure that dazzled my British friends. Many politicians and economists here spoke highly of the Chinese government's stimulus package, which they see as timely, effective and widely beneficial. Right now Western governments are in financial straits, banks, businesses, universities and charities are all short of funding, even international organizations are facing financing challenges. Naturally many of them cast their eyes on China's $2,000 billion reserve and are appealing for China to bail out.

I asked my British friends why there is such a keen interest in China, why so many things about China were targeted and magnified, why flatter us one minute and blame us groundlessly the other. They answered that it's all because China has been seen by the world as a genuinely big and strong country. A power is a giant living under magnesium light. Each and every move will catch eyeball. Any events, big or small, will become international headlines. There is no room for privacy or secrets. China is up on the centre of the world stage. What happens in China will have a global reach. Intentionally or not, what China says or acts will touch on the world, trigger heated discussions and diverse views and be examined closely under the microscope.

We in China are not quite comfortable or fully agree with these perceptions and expectation. There is a gap, honestly not a small one, lying between us and the rest of the world on how to perceive China's international status.

Ancient sayings guide us "neither to be pleased by external gain nor to be saddened by one's personal loss" and "to live at ease with either honour or disgrace, letting go of others' blame or praise". Others are over-flattering us, sweeping us off our feet. We must, however, judge ourselves correctly based on who we are, on our history and culture. In doing so, we look at facts and move along with changes. We can't afford to be arrogant and don't have to be too modest.

It is fair to say that this financial crisis has helped us know better about our own status and role.

First, to quote President Hu Jintao in his report at the 17th Party Congress, there has been a historic change in China's relations with the world in which the future of China is increasingly linked with that of the world. In the old times, none of us could have foreseen that the bankruptcy of a few big Wall Street banks would have led to so many shut-downs of our export-based businesses, home returns of thousands of millions of rural migrant workers and job challenges for college graduates. All this we are experiencing is caused by the financial crisis. People in China have never cared more about what is happening outside China, since anything in any particular corner of the world could affect ordinary households here.

Second, China should take more initiative to leverage on its growing power and influence, to better protect its national interest and contribute more to world peace and development. Under the crisis, we are urged to mobilize every bit of our resources, use every possible opportunity to preserve and expand a peaceful and stable global environment, a friendly and amicable neighbouring environment, an environment of cooperation based on equality and mutual benefits, an unbiased and amicable media environment, and a free and open environment for trade and investment. Never before has China been given the chance of revolution of the international economic and financial order to express its just demand and raise its proper concern, win more representation and greater say for the emerging countries including itself and adapt the changing order and reform in the interests of developing countries like itself. We should, therefore, see, value and take this chance to uphold and assert justice for the shared interests of people in China and across the world.

Third, China will remain a developing country for a long time to come. This is because we are still at the primary stage of socialism. Despite what we have achieved in economic and social development in the past 30 years of reform, we are still a country with a big population, weak economic foundation, underdevelopment, imbalanced growth and low modernization level. A comparison between key figures of China and UK shows that regardless of our strengths, our GDP and FDI per capita is only 1/15 and 1/25 of Britain. The latest UN Human Development Index also ranks China 73 behind UK. Comparisons clearly show that China still has a long way to go in its development.

China's status as a developing country also means that relations with developing countries are the basis of its diplomacy. China needs to preserve the interests of developing countries strenuously and help them obtain more rights and interests on the international stage. Early this year, President Hu Jintao visited Africa, the sixth since he took office and the second after the Beijing Summit of the Forum on China-Africa Cooperation. The visit sent an important message that as Africa's genuine friend, China is committed to enhancing cooperation with African countries to jointly overcome difficulties. At the London Summit, China will also urge attending parties to stay focused on development issues and not to cut aid on developing countries because of this crisis.

President Hu Jintao's presence at the London Summit fully shows that China takes the G20 mechanism seriously and values the importance of this Summit. Despite the short stay, this will still be an intensive and fulfilling visit packed with various meetings. Others are full of interests and expectation on what the Chinese leader will bring to the Summit.

China has its own expectation on the Summit as well. We hope it will help uplift confidence on global market and send a positive signal for the recovery of the world economy.

Beijing has put forward its objectives for the Summit, including:

-- Facilitate all parties to map out their own economic stimulus plans and increase coordination on macro economic policy among countries;

-- Achieve substantive progress in the reform of global financial institutions, particularly develop a timetable and road map to raise the representation and say of emerging market and developing countries;

-- Oppose trade protectionism, push the Doha round toward an all-round and balanced results and increase trade support for developing countries;

-- Stay focused on development issues and avoid any reduction of aid to developing countries due to the financial crisis.

China sees the Summit as an important opportunity for international cooperation. The Summit itself is of historic importance in that the developing and developed countries will be able to sit equally together and discuss how to resolve this major issue that threatens global development and stability. China and other emerging countries will speak out their voices to protect their interests and contribute to world economic growth. The Summit may not be able to provide all solutions, but the fact that twenty to thirty countries and international organizations can speak in one voice to express their commitments and confidence to survive through difficulties does matter for the moment.

The Summit has a heavy agenda and will see many agreements reached. One of the hot issues in the media is the IMF funding increase. Many argue that given its huge foreign reserve, China should contribute more to IMF to assist countries trapped in severe financial and economic difficulties.

IMF had a funding of $250 billion. Much has been used in this crisis. Naturally it is short of resources given the scale of the crisis and help that is needed. China supports the decision of increased funding and believes that should be done based on quota. We are also ready to discuss with other parties concerned on how to finance properly to ensure fund safety and fair returns while contributing the best we can. However, a fair and just principle is yet to be agreed on through consultation before the final decision is made.

First, it is neither realistic nor fair to decide on funding distribution among countries based on the size of foreign reserve. Generally speaking, currencies of China and other emerging economies are yet to be fully convertible. That is why relatively bigger amounts of foreign reserve are needed to support external trade and investment. Besides, our big reserve simply comes along with this stage of reform. And honestly, even it is so big, the figure divided by population only amounts to $1,500, behind the above $1,600 level of Germany, France and Italy.

Second, Foreign reserve is not a fiscal capital of a government. It is assets in foreign currency terms that are purchased from foreign exchange market after the Central Bank issues the basic currency. RMB-based forex purchase is the only way to use it. And use is limited to external trade and investment. No domestic direct use is allowed. It is the hard-earned money of the public and businesses. Central bank is only its safekeeper. It is the obligation of any responsible government to ensure that it is safe and generates fair returns when on loan abroad. While using it, the IMF should also make thorough evaluation and proper planning, conduct rigorous oversight, to ensure the procedure is fair, just, transparent and efficient.

Third, we fully understand and support the need to assist poor countries in Africa and Asia. To help others out of difficulties and poverty is a tradition in the Chinese culture. Many African and Asian countries have given us their solid support when we were in trouble. Their economies fare even worse than China. Some of the least developed countries even have lower per capita GDPs than us. Therefore, if increased funding for IMF is fulfilled, we argue that the main recipients are poor developing countries that are heavily affected by this crisis.

Fourth, IMF's existing governing structure is yet to be reformed. The majority of the quota and voting power goes to the US, Japan, Germany, France and UK. For instance, with a quota of 17.674%, the US holds 16.732% of the voting power. As over 85% of the votes are required for major decisions, the US in fact is entitled to the right to veto. Europe as a whole shares a quota and voting power of over 30%. Relatively speaking, the figures for China and India are 3.997% and 3.807%, and 2.443% and 2.338% separately. The current distribution obviously is incompatible with the world economy today. While developing countries have been appealing for greater quota and voting power, reform moved on slowly due to different reasons. The Summit should therefore set out a clearer reform objective. And while reform is impossible in the short run, it may suggest funding increase by the current quota arrangement, as quota contribution is the basic way of increasing capital adequacy ratio and supplementary capital for IMF. If quota contribution is still insufficient, bond issuance is another option. China is fully open about this possibility. I think our position is fair and just, fully reflecting the balance of rights and obligation, a universally-recognized global norm.

As the chair, the UK values China's position and role. Prime Minister Brown spoke highly of China's input and involvement and sent special envoys to Beijing twice to hear our views and consult with us. The two countries have kept good communication and coordination at different levels. In my contact with the UK government and people from different sectors, I have genuinely sensed the level of expectation for us. I am convinced that President Hu's attendance will help ensure the success of the Summit.

The world is undergoing a crisis, the size of which was only seen once in the past one hundred years. It is also embracing an opportunity for international cooperation unseen in history. With unprecedented challenges ahead of us, the world should demonstrate unprecedented solidarity, courage and confidence, to respond to global challenges through global cooperation, to cultivate a stable, mature, equal and cooperative model of country-country relationship, and to facilitate reform in the concept, structure and model of international governance. China is fully prepared and ready to join hands with the rest of the world.

We sincerely hope that building upon the spirit of harmony, cooperation and forward-looking, the Summit will be a morale-lifting and fruitful one.

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