China must grasp Euro dynamic
- By John Ross
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E-mail China.org.cn, May 21, 2012
The recent G8 summit at Camp David was dominated by discussion of Europe, both East and West, discussions which overshadowed even major world issues such as Syria and Iran. It is clear that current European events and their consequences will significantly affect both the US and China.
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Fire fighting [By Jiao Haiyang/China.org.cn] |
In terms of Eastern Europe, the headline G8 event was President Putin's decision not to attend. Few took seriously the official explanation that this was due to domestic duties - it was seen as a snub.
No one should be surprised. I lived in Moscow from 1992-2000 and saw mounting anger from Russians - not against the US people - but against US government policy towards their country. I had the opportunity to meet at numerous levels from former president of the USSR Gorbachev, senior ministers and advisers to succeeding Russian presidents, down to ordinary Russians. Their contention was that during the Cold War and Gorbachev periods, the US government made promises to Russia which were subsequently broken.
Since that period, US government policy has focused on preventing closer ties between Russia and the former Republics of the USSR, ties which are economically vital for all involved. The US has also concentrated on developing a missile shield, which any politically-aware Russian understands is directed against their country and not against its official target, Iran. Iran has no missile capable of targeting the US, and will not have for many years yet. US policy also made serious attempts to interfere in Russia's internal affairs in the run up to its last presidential election, carrying out a fairly open campaign to attempt to get another candidate than Putin elected.
The result, though, was clear and those who demonstrated in Moscow against Putin at his inauguration were not truly representative of Russian opinion. Putin received 64 percent of the presidential vote, and the second-placed candidate, Zyuganov (17 percent) and ultra-nationalist Zhirinovsky (6 percent) had "harder" patriotic stances than Putin. Prokorov, the candidate presented as the most "pro-Western", received only 8 percent of the vote compared to the 87 percent who voted for Putin or more "patriotic" positions.
US policy therefore largely brought about the Russian snub at the G8 summit.
If relations with Russia created a certain frisson, the most serious situation discussed was the difficulties in the world economy - currently symbolized by Western Europe. It is clear that four years into the international financial crisis the situation is not fully under control; in fact, in the short-term, it is worsening.
The majority of recent global economic data is negative. Three large European economies, the UK, Italy and Spain, have moved into double dip recession. In Eastern Europe, the Czech Republic, Romania and Hungary are also in recession. Brazil's economy shrank in March. World commodity prices, a sensitive indicator of global economic conditions, are 17 percent below last year's peak.
President Obama was clearly significantly concerned about these economic trends. After his bilateral meeting with France's President Hollande, Obama emphasized that economic growth was of "extraordinary importance, not only to the people of Europe but also to the world economy". He may also have had in mind that it was important for his reelection chances. Obama is currently ahead of his Republican challenger Romney in most polls. However, a worsening economy could change this.
The trends highlighted at the G8 summit are sufficiently powerful that they will inevitably affect China. Being neighbors, China and Russia should naturally forge close relations, as illustrated by the Shanghai Cooperation Organization membership. But current widespread suspicion of US policy in Russia leads it to seek especially close ties with China.
Faced with Western Europe's economic difficulties, China has recently focused on strengthening diplomatic ties with a wide range of countries. European visits by President Hu Jintao, Premier Wen Jiabao, Vice President Xi Jinping and other Chinese leaders received considerable and favorable publicity. However, in economic terms, many in China have underestimated the gravity of economic developments in Europe, and have been surprised at the political changes, seen most recently in the French and Greek elections.
A widespread reaction in China has been to support the austerity policies launched by governments in Greece, Portugal, Ireland and the governments of other countries worst affected by the crisis. The analysis supporting this was that the crisis was allegedly due to "lazy Europeans" and "unaffordable" welfare states.
Unfortunately this opinion was not supported by a serious examination of the facts. The country worst hit by the crisis, Greece, has one of Europe's weakest welfare states and Western Europe's longest working hours. If laziness was the main problem, Greece would be Europe's most successful economy! By contrast, Germany has one of Europe's strongest welfare states, but is Europe's most successful economy.
Essentially, there have been three international policy responses to the financial crisis. Europe has pursued expansionary monetary policy but austerity, not stimulus, in its productive economy - Europe's economy has shrunk by two percent over four years. The US pursued expansionary monetary policy plus stimulus measures to encourage consumer spending - its economy grew by 1 percent in four years. China pursued an expansionary monetary policy plus a stimulus to investment - its economy grew by 41 percent in four years.
It was strange, then to see some in the Chinese media applaud European austerity measures when this approach has been the least successful in terms of addressing the financial crisis. In addition, China followed a quite different path to austerity, and Europe's resulting contraction from austerity measures harmed China's exports. It is clear, then, while China's diplomacy towards Europe was surefooted, a significant amount of economic analysis was seriously flawed.
The G8 clearly failed to agree on policies to deal with Europe's situation. The final communiqué merely expressed agreement to disagree: "The right measures are not the same for each of us". Consequently, Europe's economic crisis will continue and it is therefore crucial that China's diplomacy towards the continent is accompanied by a much better economic understanding of Europe's dynamics.
The author is a columnist with China.org.cn. For more information please visit: http://www.china.org.cn/opinion/johnross.htm
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