Merkel in China: World Looks to Beijing for Financial Crisis Help
Dozens of world leaders are gathered in Beijing for the Asia-Europe summit this week. The question on everyone's mind is: Will China cooperate in facing down the global financial crisis?
On the coffee table of presidential suite 1718 in the Grand Hyatt Hotel in Beijing sits a vase full of red roses next to a picture book about Chinese jade. Everything in the room was perfectly prepared on Thursday afternoon for German Chancellor Angela Merkel for when she returned to her room from her meeting with China's premier, Wen Jiabao. She was received in style, with a 19 gun salute from the People's Liberation Army on Tiananmen Square in the heart of the city.
On Friday, Merkel moved on to a meeting with Chinese President Hu Jintao and the two came up with a common position in preparation for the world finance summit scheduled for the middle of November in the US. China, Merkel said following the meeting, supports the idea that global financial markets need to be re-examined in the wake of the ongoing crisis.
Merkel is in good spirits. The Chinese-German relationship has become civil again after many long months of frost, stemming from a meeting between Merkel and the Dalai Lama last autumn. Things have normalized to the point that Merkel can say that her meeting with Wen was "friendly and open." Both sides, said Merkel, "are, despite differences of opinion, intent on working together."
The German chancellor, though, was not the only one for whom the red carpet was rolled out on Thursday. Indeed, the Great Hall of the People was crowded with statesmen and stateswomen. The soldiers in the honor guard on Tiananmen Square seemed to be reloading their rifles as fast as they could. Almost at the same time that Merkel arrived, Polish Prime Minister Donald Tusk began making his way into the halls of Chinese power. Then came the Dutch leader, the Irish prime minister, the Italian head of government, the leader of Singapore and, finally, the Romanian representative arrived.
ASEM does provide over 40 heads of state and government with the opportunity to meet informally and chat about the issues of the day. But it has rarely resulted in anything substantive. The group, for example, has been unable to exert any influence of note on Burma's ruling junta nor has it had an affect on Chinese human rights policies. North Korea, it almost goes without saying, isn't invited.
This year, though, things are a little different. The conference in Beijing takes place at a time when financial markets are teetering, banks are tottering and stock markets have become as unpredictable as a roulette table. The world is looking for a solution -- anything to avoid a global recession -- and everyone has a role to play, especially an economic giant like China.
European Commission President Jose Manuel Barroso said it very clearly on Thursday: "Simply -- we swim together or we sink together. We need Asia to be on board and more particularly countries like China and India."
Financing the US Deficit
So far of course, China's banks and companies -- by all appearances -- have not been hit as hard as financial institutions in Europe and the United States. On the other hand, China owns a $14 billion stake in the aluminium conglomerate Chinalco, whose account at Lehman Brothers has been frozen because the bank went broke.
China also holds hard currency reserves to the tune of $1.9 trillion, more than any other country in the world. It holds US government bonds, helping to finance the US deficit.
For the moment, no one seems to quite know exactly what kind of role China will play when it comes to stabilizing global markets. But China's support will be critical when new rules to govern the world of finance are established -- rules that will be discussed at the G-20 summit in the US on Nov. 15. ASEM has already been successful on one count: China has at least signalled that it plans to attend the meeting.
But there is still an elephant in the room in Beijing -- the fear that China's rapid growth could come to a halt, ending the country's role as the motor of the global economy. Last quarter, the country's growth dropped to 9 percent -- an enormous achievement, to be sure, but China's lowest growth rate in five years.
A number of countries are using the ASEM summit to ask China to help out when it comes to dampening the effects of the financial crisis in Asia. Thailand would like to see Beijing improve the exchange rate. The Philippines want Chinese assistance for a bank bailout package. On Friday morning, China and 13 other Asian countries agreed on the establishment of an $80 billion fund to prop up Asian currencies should it come to that.
Simply Too Important
Back in the Grand Hyatt Hotel, when Chancellor Merkel was speaking to journalists in her suite on Thursday evening, she was handed a small note. It was the news that the European Parliament had awarded Chinese human rights activist Hu Jia the Sakharov Prize, a 50,000 award handed out annually to those who stand up for human rights. Hu Jia was arrested earlier this year in the run up to the Olympic Games and subsequently sentenced to three and a half years in prison for "attempted subversion." His sin was standing up for other Chinese dissidents and criticizing the Olympics.
Merkel commented that she has always done her best to convince the Chinese to release Hu. But it was a delicate moment in the ASEM summit. Beijing's ambassador in Brussels had made it clear in recent days that there would be serious consequences for EU-China relations should the European Parliament decide to honor Hu.
The tension came to a head in the evening at the ASEM press center in the Beijing International Hotel when Chinese spokeman Liu Jianchao climbed up to the podium. First and foremost, he said, he wanted to praise his own government for the excellent preparation in the run up to the meeting. But the very first question was about Hu Jia. "This is a gross interference in China's domestic affairs," he said. "I do not believe that anyone gets anywhere by interfering in the affairs of others."
When it came to the ASEM summit itself, though, Jianchao backed down. He said he didn't think the award would affect the outcome of the meeting. After all, the other problems on the agenda are simply too important.
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