China: National interest first

Antoaneta Bezlova

While much hope is focused on China as the one bright spot in the current financial gloom, Chinese leaders are drawing a line on global expectations, reminding the world that their country’s priorities come first. Chinese Premier Wen Jiabao said Friday, in his only scheduled press conference of the year, that Beijing’s first and foremost priority, in the face of the global financial crisis, was to take care of China’s national interests. Speaking at the closing of the annual meeting of the nation’s legislature, in the Great Hall of the People in Beijing, Wen said that in managing the country’s massive foreign exchange reserves, “our first consideration is the national interest”.

But he conceded, “we also have to consider the stability of the overall international financial system, as the two factors are interlinked.” As the freefall of global markets continue and credit crunch is squeezing more and more world economies, China, which sits on two trillion of US dollars in foreign exchange reserves, is being looked upon as a beacon of hope. But the country’s Premier left no doubt that Beijing had pre-conditions for extending a helping hand. Asked if China would consider contributing more to the bailout fund of the International Monetary Fund IMF), Wen said any such pledge would be voluntary and take into account any individual country’s conditions.

“I believe such increase of contributions to the IMF is not for just for one single country to contemplate,” Wen said, “but it has to be undertaken by all countries according to their (IMF) quotas.” He pointedly voiced concern about the security of Chinese investments in the United States, asking the Obama administration to “honour its promises and to guarantee their safety”. “We have lent a huge amount of money to the United States,” Wen said, “and to be honest, I’m a little worried”. As the United States’ largest creditor, China would seek to “fend off risks” and safeguard its own interests, he pledged. As of Dec.31, China had invested 696 billion dollars in United States treasury bonds.

In the two-hour pre-scripted meeting with the press Wen Jiabao devoted considerable time to defending China’s policy decisions in the midst of the global downturn, saying the leadership stood ready to unveil additional measures to revive the world’s third largest economy. China has “adequate ammunition” to shore up shaky public confidence and can add up to its four trillion yuan (585 billion dollars) stimulus package at any time, the Premier said.

Aware of how a continuous flow of weak economic data is eroding trust in government capacities to deal with the crisis, Wen repeatedly emphasised the need for confidence building. “Confidence is more important than gold and money,” he told reporters during the nationally-televised conference. “First and foremost, we have to have very strong confidence.”

But four months after the government announced its first stimulus package, the overall economic picture looks equally precarious. Last year’s GDP of 6.8 per cent was the country’s lowest since 2001, and half of its blistering 13 per cent growth in 2007. While investment jumped a higher than predicted 26.5 per cent in the first two months over a year earlier, plunging exports have resulted in the worst trade contraction China has seen in years.