APRIL 3, 2009
By Terence Poon
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--China's assertive stance in the run-up to the Group of 20 nations summit has paid off.
In the two weeks before Thursday's G20 meeting, Beijing called for developing nations to have a bigger say in world financial institutions, for the International Monetary Fund to step up its surveillance of advanced economies, and for reform of the global financial system.
The forthright expression of its views - in essays from the central bank governor, a press briefing and an opinion piece by a vice-premier - was unusual. With other countries in the BRIC group - Brazil, Russia, India and China - Beijing has used its assertiveness to shape the G20 agenda, helping BRIC achieve many of its goals.
"There are some huge wins for China in this agreement," Standard Chartered Bank economist Stephen Green said after the summit ended. "Now, more than ever, wins for the global economy are wins for China, and their mutual dependence has never been clearer."
The G20 statement supports even-handed IMF economic surveillance, calls for merit-based appointments of IMF and World Bank heads, and pledges to hasten reforms to make both agencies more representative. BRIC finance ministers had called for these changes at their March meeting in London.
Besides the push to improve financial regulation and accelerate IMF governance reforms, the G20's plan to inject more than $1 trillion into the world economy through the IMF and trade finance programs will probably help stabilize demand for Chinese exports, said Green.
Analysts say Beijing has grown more assertive because its economy is increasingly affected by policies elsewhere, and also because it sees the financial crisis as a chance for small steps toward a bigger international role.
Beijing is concerned trade barriers, such a half-year ban on Chinese toy exports to India, will hurt its exporters and workers just as global trade is shrinking.
As the biggest creditor nation to the U.S., it is also worried the U.S. efforts to revive the economy by widening the fiscal deficit and pumping liquidity into the financial system could eventually fuel U.S. inflation.
That would erode the value of China's dollar assets and add to domestic price pressures. Chinese President Hu Jintao Thursday urged G20 leaders to "improve the mechanisms for controlling the issuance of reserve currencies" and the IMF to strengthen supervision of reserve-currency nations, especially their currency-issuance policies.
To be sure, Beijing's newfound assertiveness may still lead to friction with the U.S. and Europe, but analysts say Beijing is likely to keep a measured tone.
During the London summit, for example, the Chinese and French went back and forth on tax havens, but they reached agreement when U.S. President Barack Obama suggested compromise language acceptable to both sides.
Nicholas Consonery, an analyst at political risk consultancy Eurasia Group, cites Beijing's move on tax havens as "a sign of willingness to compromise."
-By Terence Poon, Dow Jones Newswires; 8610 6588 5848; terence.poon@dowjones.com
online.wsj.com/article/BT-CO-20090403-709820.html
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