I have argued that the euro-crisis and the associated G20 meeting could be seen as opportunities for China’s diplomatic entrance into global politics as a smooth and sympathetic operator (“Era of Chinese soft power beckons,” Oct. 31, page 8). However, one element has always been that China was unlikely to be forthcoming as the principal financial donor in the face of G20 criticism of its economic system or, more particularly, of the exchange rate of the yuan.
Yet in an end-game of the G20 on Nov. 4, its leaders called for more “flexible” exchange rates globally, and named China clearly in this regard. Would the tone have been quite the same if China had been clearly leading a Brazil, Russia, India and China (BRIC)-styled bailout?
It seems likely that China withheld its fortune as a result of very unwise short-term thinking. In doing so it missed an opportunity at the more global levels of soft power. An extended euro-crisis might now become a clear loss for China.
Too underestimated were the discussions on Thursday last week among the BRICS (including South Africa) at their own meeting at Cannes, a meeting structured as global with a focus on the developing world, in which the euro-crisis would be the central, rather than the only, issue.
It became clear that any arrangement regarding the euro would be between them and the IMF as a joint route. India’s position seemed cautious, with genuine consideration of the financial viability of the euro system as the limiting factor.
This is not to say that diplomacy and soft power was not a major issue. Clearly the BRICS wished to make these meetings a platform for their role as powerful representatives and protectors of the wider developing world. On her arrival in France on the previous day, Wednesday, Brazilian President Dilma Rousseff had said that any bailout must have as its chief aim the employment growth and development of the trading system more generally. Here there was real chance for Chinese leadership, and it appears that the opportunity was not taken.
In his Art of War (孫子兵法), Sun Tzu (孫子) posited that the general that loses a battle has made too few calculations. May China now recalculate and successfully play a longer-term game?
Much may depend on whether Chinese public opinion is more nationalistic and wise than communistic and dull. If it is something else, nationalistic and dull, then it may well resent any euro-bailing whatsoever, and Chinese leadership could use that to completely withdraw or to impose harsh political reciprocities on any future deals, and thereby risk friction with BRIC partners and the possible passing of BRIC leadership to India.
On the other hand, if the Chinese middle-class public is nationalistic but wise, it may take the longer view that global goodwill is a major asset. Goodwill may not be necessary, but it always eases any passage toward increased status and soft power. The 30 years of Chinese growth and the expansion of an educated and globally attuned middle class may well now make it possible for a newer Chinese leadership to see the deeper as well as the broader picture. This may well be the era in which the Chinese middle class begins to exert some global impact.
This latter element would mean that public opinion could be utilized by the Chinese leadership to help play the better global game. This might be even more salient with an eye on the US, whom may be in a similar position to that of Europe within months from now.
However, there are other factors that may work in this more liberal and optimistic direction. It seems very likely that the Chinese economy is approaching a crisis of productivity arising from core technological backwardness and institutional stagnancy.
Despite massive currency holdings and almost impossibly high ratios of investment to national income, there are emerging real issues relating to overall production efficiency, a possible structural turning point and a present need for technological renewal.
In China, political changes have often come with the need for improved technological efficiency, which has historically required adjustments in relations with major high-tech suppliers — first the USSR, followed by the US, followed by Japan, followed by a combination of the West and Japan with some important additions from the Asian newly industrialized countries in the more labor-intensive or routine part of Chinese manufacturing. Throughout its years of growth, then, China has been broadening its sources for high and medium technology transfer as an essential component of its economic tactics.
Continuation of this technological strategy might require a wiser commercial diplomacy than that suggested by those who believe China nationalistic, but dumb. The more conservative route through the problem would be to rely on the other BRICS nations for a sharing of technologies in complementary industries and export products. However, this will not in itself deliver the “best from the West,” which without any doubt continues to dominate core technological advances in all major industries — the total of all middle-income nations raise perhaps one-50th of the receipts on royalties and license fees of the high-income nations.
So, if Chinese leaders consider that very high-tech transfers are essential to the good health of the economy, if wise they should be very loath to unnecessarily rock the global boat. And they should by now have begun to play the euro-game more astutely.
Ian Inkster is a professor of international history at Nottingham Trent University in the UK and professor of global history at Wenzao Ursuline College in Greater Kaohsiung, and since 2000 has been editor of History of Technology.
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