Last November I wrote a posting on "What a Difference Money Makes" in foreign policy. The thrust of the it was that Chinese President Hu Jintao had just completed a trip to Europe during which he indicated that China would help Europe with the fiscal problems of several countries. At the time China had already bought some Greek debt and was willing to help other countries such as Portugal, Spain, Italy and Ireland.
While the Chinese President was using that country's almost $3 trillion in foreign reserves to make friends and influence people, President Obama, struggling with debt and budget problems, was on a 10-day Asian tour to promote sales of U.S. products to create jobs in this country. In short, we were and continue to be in an economic/fiscal mismatch with China. We are broke while China is awash in cash.
That mismatch was again apparent last week when Chinese Premier Wen Jiabao visited Europe and said China will be investing in more European bonds. This came as a welcome relief to the Europeans who are again trying to settle the problem of Greek insolvency and potential fiscal default. In Hungary Wen said China would be buying more of that country's bonds while at the same time financing through loans about $1.4 billion of development projects in Hungary.
While Wen was once again spreading Chinese largesse across Europe, U.S. Treasury Secretary Tim Geithner was criticizing the Europeans for failing to have a unified voice in dealing with its financial bailout issues. One could ask Geithner where our own unified voice is in dealing with the U.S. debt limit and mega spending cut issues. And just about two weeks ago outgoing U.S. Defense Secretary Robert Gates strongly criticized Europe for its failure to live up to its NATO commitments and underfunding their defense establishments. While both Geithner and Gates may be justified in their criticisms, their complaints to Europe stood in sharp contrast to China's positive commitments to help Europe with its current most pressing problem -- avoiding bankruptcies in several countries and protecting the viability of the Euro as a major world currency. The economic mismatch will continue globally for a long time, but perhaps the least we could do is to do less preaching to other nations. (See posting, "The Gospel According to Us").
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Also to be noted is that China's international charm offensive does not extend to its disputes with several Asian countries over control of the Spratly Islands in the South China Sea. The dispute pits China against Malaysia, the Philippines, Vietnam and Brunei over control of the islands and their rich offshore resources, including gas and oil. The dispute has been particularly acute between China and the Philippines and Vietnam who charge that China is using its naval power to bully those countries that dispute its claims to the Spratlys. China has also told the United States to stay out of its territorial disputes with its neighbors.
While on the subject of China, it was interesting to note that China has now stepped into the Libya crisis, seeming to charm both sides. It has elected not to choose sides but rather serve as a negotiator with Gaddafi while at the same time hosting representatives of Libya's National Transition Council (the rebels) in Beijing.
In foreign policy, charm, like money, counts for something.
China is becoming a big sugar daddy. They are going to own the world soon. I really find it amazing that anyone in our country would have the gall to be criticizing anyone over their handling of fiscal affairs. I think the Geithner criticism is the worst. Talk about the pot calling the kettle black. Criticizing Europe for not having a unified voice in dealing with their financial bailout issues. To quote that all too often used phrase now which is getting annoying..REALLY?! There you're talking about multiple countries with multiple leaders and each having their own self interests. What excuse do we have handling the affairs of just one country. Maybe they ought to spend less time criticizing other countries and more time ensuring the same doesn't happen to us. There is too much fear that we are currently heading the same way as Greece.
ReplyDeleteWhen I think of charm I think of cobras.
Carole
ReplyDeleteAn interesting thing is that China has been shifting its investments from resources which it needs, such as gas and oil, to funding infrastructure projects in other countries now including Europe. Wouldn't be surprised if they ending up buying some of Greece's physical assets which may be sold, such as roads and airports.
It is a little gross when our officials take up preaching to other countries, which we have been and continue to be prone to do. Believe it was in the 70s when we were preaching to Japan on how to organize their economy and it wasn't long before Japan was doing the teaching, although those days are long gone for both sides.
Europe's biggest problem right now is saving the euro. Seventeen countries use the euro and there is a European Central Bank but countries manage their own budgets through their own systems so they do things that may fit their own needs at the time but run counter to the centralizing features of the euro pact. In short, Greece did what it politically wanted to do but the resulting problems have now washed back on the other countries using the euro who have to bail them out (although Portugal, Spain, Ireland, and Italy may have some Greek-like problems). If we go the way of Greece, which is doubtul, the problem washes back on the world.
Liked your cobra imagery.
The world is full of fools and faint hearts; and yet everyone has courage enough to bear the misfortunes, and wisdom enough to manage the affairs, of his neighbor. ~Benjamin Franklin
ReplyDeleteIt is almost embarassing that we are doling out financial criticism when our own house isn't in order. We are in the same Chinese bailout wagon as Europe.
DesertGirl
ReplyDeleteAmen. We are living high off of the Chinese hog. But unlike the Europeans, we have just one budget/deficit/debt to deal with. They have to deal with 17, each controlled by the politics of the individual countries. The real heavy lifting in Europe has to be done by the Germans and French whose banks are the biggest holders of securities from the various countries. Great Britain and a few others must be happy that they never adopted the euro.
Wonder how "In God We Trust" will read in Chinese on our currency sometime in the future.
It is surprising the "coalition" has lasted. I also imagine Great Britain in happy to not have adopted the euro and Switzerland must be glad it remained "neutral". It must be frustrating, to say the least, for the citizens of the financially stronger countries to be dragged down by the deficits of countries like Greece.
ReplyDeleteChina is certainly becoming an economic powerhouse. Yes, "In God We Trust" in Chinese and a picture of Jintao on every coin.
Desert Girl
ReplyDeleteThere is one thing you have to say for Greece. When pressed to the fiscal wall by the wealthier fellow members of the European Union and the International Monetary Fund, the Greek government chose a fiscal package of huge spending cuts, including social policy cuts, AND major increases in taxes. Presumably they had no choice and had to do both, but I'm not sure the GOP recognizes that we are confronting the same thing. The GOP is happy to shout that this country may end up like Greece but is silent on the obvious remedy which Greece chose.
Worst case scenario: a picture of John Boehner.