China’s investing woes

Phil Levy

For those who believe it is just a matter of time before China rides its commercial success to global hegemony, this week offered some compelling imagery: Europe, on its knees, reeling from political discord, rising bond yields, and bank downgrades; China, sitting atop its $3.2 trillion hoard of foreign exchange reserves, condescending to dictate the terms of European surrender.

Of course, Chinese Premier Wen Jiabao was not so tactless as to describe it as surrender. He actually expressed a "readiness to extend a helping hand and a readiness to increase (Chinese) investment in Europe." It wouldn’t hurt, he went on, if Europe should decide to grant China market economy status, effectively lowering trade barriers.

Fareed Zakaria translates this into great power politics terms:

In a world awash in debt, power shifts to creditors. After World War I, European nations were battered by debts, and Germany was battered by reparation payments. The only country that could provide credit was the United States. For America, providing desperately needed cash to Europe was its entry into the councils of power, a process that ultimately brought a powerful new player inside the global tent. Today’s crisis is China’s opportunity to become a ‘responsible stakeholder.’"

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