Oh, to be a fly on the wall to hear what Chinese officials want in return for saving the euro.
Yes, President Nicolas Sarkozy, we will take France’s Arc de Triomphe and the Louvre as collateral. The Mona Lisa will look grand hanging in Beijing. Toss in the Champs-Elysees and Louis Vuitton’s flagship store and we’ll consider swapping more of our $3.2 trillion of reserves for your bonds.
Hi, Prime Minister Silvio Berlusconi. Aside from invitations to your bunga-bunga parties, we would be happy with Italy’s Roman Forum, Venice and those Tuscan vineyards of which our nouveau riche are so fond. Keep the leaning Tower of Pisa ― we’re leaning toward the Eiffel Tower. At least it’s straight.
Greece’s Acropolis, Ireland’s Ring of Kerry, Spanish cities like Bilbao, a Portuguese castle or two, Finland’s Nokia Oyj and Germany’s Mercedes-Benz brand could end up in China’s shopping cart. Or Beijing could resist instant European gratification and focus on the real prize: acceptance of China as a market economy long before it’s deserved.
It’s a bigger payoff than meets the eye. By bailing out the euro zone, China would silence some critics on the yuan, trade practices, human rights, climate change, territorial disputes, intellectual-property rights and its support of dodgy regimes from Sudan to Myanmar. Talk about money well spent as China gears up for a major leadership shift in 2012 amid increasingly unsettling global trends.
Buying Europe’s vote won’t cost China very much, but the price may be much greater for the future of the world financial system. It’s no wonder Sarkozy is under fire from opposition leaders for so publicly seeking China’s help.
“It’s shocking,” Martine Aubry, general secretary of the Socialist Party, told Journal du Dimanche. “The Europeans, by turning to the Chinese, are showing their weakness. How will Europe be able to ask China to stop undervaluing its currency or to accept reciprocal commercial accords?”
Consider what Chinese Premier Wen Jiabao said in September: “We have on many occasions expressed our readiness to extend a helping hand, and our readiness to increase our investment in Europe.” At the same time, Wen said, “they should recognize China’s full market-economy status” before the 2016 deadline set by the World Trade Organization. “To show one’s sincerity on this issue a few years ahead of that time is the way a friend treats another friend.”
Playing the friend card has gotten China further than many officials in Washington realize. While the U.S. was invading Iraq, squandering resources and alienating allies in the 2000s, China was spreading its largess everywhere. From Africa to Latin America to Southeast Asia, there has rarely been a road, bridge, port, dam or pipeline project that China won’t finance. It’s savvy pocketbook diplomacy.
China has quietly reduced the list of governments that recognize Taiwan as an independent nation. It won significant concessions from nations such as the Philippines, which in 2010 boycotted the Nobel Peace Prize ceremony for Chinese dissident Liu Xiaobo. Last month, South Africa made it impossible for the Dalai Lama, Tibetan Buddhism’s spiritual leader, to attend Desmond Tutu’s 80th birthday celebration. It wouldn’t be because South Africa was deferring to the wishes of its benefactors in Beijing, would it?
This may seem like small beer relative to the growing challenges facing the world economy. Yet China’s ability to go its own way will only increase if one of the world’s three main currencies is beholden to it. That’s exactly where we’re heading as Europe so actively seeks Chinese lifelines. Get ready for Russian overtures, too. This week, the Kremlin’s top economic adviser said Russia would make a “few billion dollars” available to help the euro.
China would surely counter that it’s just being a good global citizen. What the world needs, though, isn’t China in the role of banker or shareholder. It needs China the stakeholder. China is a global leader and must accept the responsibility that comes with that status. The world needs China to be a constructive steward of an international system that has lost its way.
A more helpful step would be to let the yuan’s value rise. Not because the U.S. says it should, but because it would be in the best interest of China ― a weak yuan is adding to overheating risks ― and developing Asia, too.
China is focused on raising its 1.3 billion people out of poverty. There’s no point in dancing around the fact, though, that the second-biggest economy is doing so at the expense of the rest of Asia. Officials in Jakarta, Manila and Hanoi are feeling the pressure as rabid competition from China undermines living standards.
When other countries criticize China, it reflexively defends all policy as domestic matters that are off-limits to outside scrutiny. That may be true of China’s aggressive Internet-censorship tactics. It’s not true when China’s priorities on everything from trade to piracy to finance to pollution to North Korea make international cooperation more unwieldy than ever.
In the long run, handing over the Mona Lisa makes more sense than the West’s growing indebtedness to an economic giant intent on relations where benefits flow in just one direction.
By William Pesek
William Pesek is a Bloomberg View columnist. The opinions expressed are his own. ― Ed.