Hu Jintao Said….

At a meeting between Hu Jintao and Guangdong delegates to the NPC session this year, Hu was quoted as saying:


“Now many countries are saying that China is good and hope that China will emerge (to help them), but honestly we are still a developing country. Don’t over estimate the fact that we have almost 2 trillion dollar in our foreign exchange reserve. If you take that amount and divide it by 1.3 billion people, how much per head is that? Therefore, we truly need to conduct our own affairs well.”

Okay, what do we learn from this?

Chinese commitment to help bail out other countries is nearly zero. Perhaps a few billion will be thrown at the IMF or World Bank, but beyond that, there will be little.  There were some currency swaps recently between China, Japan, South Korea, and Hong Kong, but I view them as largely symbolic gestures than genuine help.  Also, part of conducting China’s affair well is to continue to expand China’s export markets. Earlier in the session he said to the Guangdong delegates that:


“If the European and American markets don’t do well, we ca develop the markets in Southeast Asia, South Asia, Middle east, Gulf states, and African states, consolidate and pioneer international markets”

Eh well, I guess all of the above except for the resistant South Asian market! Clearly, beyond doing everything possible to maintain stability, China does not have a fundamental interest in facilitating re-balancing; this process will have to be pushed forward by falling consumption from the US and Europe.  As Michael Pettis pointed out recently, the Chinese stimulus package mainly builds up even more capacity, which exacerbates the imbalance.  Although there are components which seek to increase domestic consumption over the long run, they are relatively minor parts.  (I do give them credit for reducing fixed asset investment by 300 billion RMB though, but only to give to the large SOEs through a ‘strategic revaitalization plan’!  Great job! deciples of Oscar Lange)

4 Responses to "Hu Jintao Said…."

  1. Guest   March 9, 2009 at 12:25 am

    And would you expect something else? The bottom line is Big nation, 2000-year’s of Statehood and survive all other nations and empires. According to Chinese war games strategies weakness of your enemy brings you opportunity to attack or take advantage. This way of thinking can’t change overnight. Rhetorics and means may change with changing environment but goals and strategies will remain. On the other hand I would be quite interested to learn more about Chinese banking assets allocation. I suspect government and mainstream economists from masking a structural problem. Chinese banks (SOEs and municipal) have funded lots of infastructure projects which would normaly be funded by the State through T-bonds. I wouldn’t be surprised to see Chinese government debt/GDP stand close 80% to 100% as all banking assets/GDP used to be around 225% few years ago and debt probably expanded faster than GDP in past few years. If this is true how much manouvering space China has?

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  3. Anonymous   March 13, 2009 at 1:14 pm

    Question is – what moral responsibility does China have in helping any other country, in particular populations ten times richer and overspending than they are? Did the US or France or the UK help China in the last 50 years or did they thumb their noses at China? Ask yourself.

  4. Anonymous   March 16, 2009 at 12:39 pm

    I would say they helped China in the form of:aid- both financial and technicaltrade- China has a large surplus with most rich Western countriesFDI- China receives a huge amount of foreign direct investmentYou will see just how much these impacted on China’s economy as it continues to slow.