Antoaneta Bezlova

Internal concerns are beginning to supersede China’s ambition to play the role of responsible international stakeholder and spearhead demands for the establishment of a new global financial order. While Beijing wants a bigger say in global financial bodies that are to emerge from the current economic crisis, its priorities lie with boosting an increasingly sluggish domestic economy. With an eye on the upcoming emergency financial summit in Washington on Nov. 15, Beijing has preempted calls from international heavyweights to prop up cash-strapped foreign financial firms by unveiling a massive stimulus package to spur the domestic economy.

On the weekend China said it would spend nearly 600 billion US dollars through 2010 to boost domestic demand and offset a fall in exports. The announcement released through the state news agency Xinhua said the money will be invested in the construction of airports, highways and the modernisation of railways. It said more measures like tax cuts and a possible interest rates reduction were being planned to stimulate internal demand.

The stimulus package comes as Beijing is facing pressure to play a bigger role in the search for solutions amid the global financial uncertainty. China, which sits on nearly two trillion US dollars in foreign exchange reserves, has been called upon to use some of its wealth to arrest further financial disarray and deepening of the crisis.

British Prime Minister Gordon Brown has appealed to China and oil-rich Persian Gulf states to fund a major increase in the 250 billion US dollars bailout fund at the International Monetary Fund (IMF) to assist struggling countries. And French President Nicolas Sarkozy has said he wants emerging economic powerhouses like China and India to have a bigger say in global decision-making and help redesign the current economic architecture. Experts are, however, voicing concerns that the price China is being asked to pay for its elevation in global financial rank is too high in the current economic slowdown. Zhang Wenkui, of the State Council Development Research Centre, believes China’s internal challenges are much greater than the potential damage wrought by slowing external demands for Chinese manufactured goods. “It is wrong to focus on what damage the global financial crisis may do to us when the problems the country faces internally are far more daunting,” he says.

Chinese leaders are taking cue. Announcing the stimulus package on the weekend, Beijing said it was reversing its previous course of “prudent” fiscal and “tight” monetary policy. The government is going to pursue “proactive and moderately loose” monetary policies now, the Xinhua news agency said. Speaking at the G20 meeting of finance chiefs in Sao Paulo, China’s central bank governor, Zhou Xiaochuan, said that in the light of global economic slowdown China wanted to continue to serve as an engine of growth, maintaining its economic expansion. He forecast an 8-9 percent GDP growth in 2009.While few specifics have emerged about what proposals China would table at the summit, academics here have suggested that China considers swapping its contribution to a bailout fund for a larger voting share in the IMF and a bigger say in global bodies like the Word Bank and the WTO.