China, holder of the world’s largest foreign currency reserves, was under growing pressure on Friday to get more involved in international efforts to halt the global financial crisis.
The diplomatic focus of the crisis shifted to Beijing, where China’s leaders, hosting a 43-nation Asia Europe Meeting, were urged to participate in a range of plans, from regional infrastructure funds to talks on new global financial regulation.
The so-called Asem summit lacks a great deal of formal substance but this year’s meeting in Beijing has become a symbol of the way that China’s new financial clout entails large political responsibilities.
Chinese leaders have carefully avoided committing themselves publicly to specific action to combat the international effects of the financial crisis, although they are keen to be behave “with a sense of responsibility”, as President Hu Jintao said on Friday. In the build-up to the meeting, the Philippines called for the creation of a multi-billion dollar fund to recapitalise Asian banks, while Thailand has proposed pooling Asia’s foreign exchange reserves to create a $350bn (€276bn, £221bn) development and crisis prevention fund.
Some European leaders have come to Beijing seeking to enlist Chinese support for plans to redesign global financial regulation at an international summit next month.
“Europe would like Asia to support our efforts,” Nicolas Sarkozy, the French president, told the summit.
“All the countries with current account surpluses have people knocking on their doors at the moment and China with the biggest surplus will be the most courted,” said Charles Grant, the director of the London-based Centre for European Reform.
Although diplomats said China had accepted an invitation to the November 15 summit, Mr Hu suggested on Friday that China’s principal role in resolving the crisis would be to sustain high growth.
“For China’s economy to maintain a healthy state is itself an important contribution,” he said.
Xi Jinping, China’s vice-president, was a little more specific in a speech earlier this week, although he too stopped short of calling for global financial regulation.
“It is crucial to strike a balance between innovative products and supervising financial institutions,” he said.
Academics said China will back any international solutions that appear to encourage greater stability but will not want outside interference in regulating its own financial sector.
Local analysts have stressed that in spite of its huge foreign exchange reserves and relatively resilient economic growth, China remains a poor country with only limited capacity to shore up nations buffeted by the financial crisis.
Some Chinese scholars argue that the crisis was created in the US and it would be wrong to expect China to take the lead in resolving it.
Shi Yinhong, professor of international politics at Renmin University, warned that there was also “some distance” between the hopes for Chinese support and what Beijing will actually be able to offer.
“I don’t think China can contribute as much as is expected in some capitals,” he said.
He said even in cases where China might be willing to offer substantial financial backing, such as for close south Asian ally Pakistan, its primary considerations will be diplomatic and political. Officials will make sure assistance is delivered quietly rather than risk criticism that they are putting other nations’ interests before those of their own citizens.
Plans for $80bn liquidity pool
East Asian states reaffirmed plans on Friday to expand a currency swap scheme to create an $80bn (€63bn, £50bn) pool to aid member nations’ liquidity, writes Mure Dickie in Beijing.
The plans to transform the “Chiang Mai Initiative” network of bilateral swaps into a multilateral mechanism were affirmed at meeting of the Association of South-East Asian Nations along with Japan, China and South Korea. The deal before a summit session of the Asia Europe Meeting (Asem) was billed as a response to global turmoil. But participants said east Asian economies remain relatively robust and changes will not be made until 2009.
Asem members were unable to agree on Friday night on a statement urging the International Monetary Fund to play a “critical role” in helping nations and “comprehensive reform” of financial systems.
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