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)