China thus far has remained an oasis of relative economic stability in an uncertain global economy. A weaker domestic economy aside, a host of data suggests China may have turned the corner. If this rebound is sustained, Beijing can claim to have delivered on its policy objectives far quicker than any of its global counterparts.
With this growing sense of stability has come a louder international voice, as was evident in and around April’s Group of 20 meeting in London.
Comments made by President Hu Jintao and Zhou Xiaochuan, the central bank governor, suggested a clear agenda. First, they wanted developed world nations to do more to stimulate their economies, the implication being that – unlike in China – efforts so far had been insufficient. Second, Hu and Zhou were concerned about the value of China’s US dollar-denominated holdings, even calling into question the dollar’s status as the default global reserve currency.
China left London a satisfied participant. Discussion of environmental issues was overshadowed by economic priorities, and the final communiqué was in tune with a number of Beijing’s wishes. More money will be pumped into the IMF – some of it from China – but there will be efforts to rebalance the voting rights within such organizations, which could mean a bigger say for China.
The G20 members will also channel more money into trade finance, a move that should help Chinese exporters. Beijing has already agreed to US$95 billion in currency swap deals with six countries, most recently Argentina. This means transactions can be settled using renminbi rather than US dollars, thereby getting around the liquidity crisis that has slowed trade in the dollar-dependent world.
Anti-protectionism was also high on Beijing’s G20 agenda, both in terms of facilitating trade and removing potential barriers as China seeks to assert itself on another front: overseas acquisitions. The focus is very much on hard assets. Two-thirds of the US$52 billion China spent on foreign acquisitions last year was focused on natural resources, according to Dealogic. As of mid-April, natural resources accounted for nearly all of the US$23.2 billion spent so far in 2009.
Beijing is offering multi-billion dollar lines of credit to resource-rich nations in exchange for oil supplies. In mid-April, Kazakhstan became the latest country to sign up for such a deal, following in the footsteps of Russia, Brazil and Venezuela. Speaking at April’s Boao Forum for Asia, Fu Chengyu, president of China National Offshore Oil Corp (CNOOC), complained that protectionism prevented domestic oil companies from making direct investments in overseas energy assets.
The fate of Aluminum Corp of China’s proposed US$19.5 billion investment in Australian mining giant Rio Tinto also hangs in the balance, with regulatory approval still pending. However, Hunan Valin Iron and Steel’s bid for a stake in Fortescue Metals did receive the green light in Brisbane, while China Minmetals, which is looking to take over struggling miner OZ Minerals, submitted a revised proposal in April that excluded assets Australia’s regulators deemed to represent a national security threat.
Nonetheless, China Investment Corp (CIC), the country’s sovereign wealth fund, is looking once again to Europe for potential investments. CIC Chairman Lou Jiwei told the Boao Forum that European concerns over CIC’s transparency, which essentially drove the fund from the continent last year, had allowed it to sidestep potentially embarrassing losses.
“I have to thank these European officials. They saved me a lot of money,” Lou said.