Just in case anyone was thinking of dusting off the idea that China might bailout Europe, here’s a repeat of its demands: conferral of “market economy” status (for WTO purposes) and an “ironclad” guarantee that they’ll be paid back.
This is Yao Yang, director of the China Center for Economic Research at Peking University, who we can assume is toeing the party line when writing first at Project Syndicate and then, on Tuesday, for China Daily.
Yao makes the point that the West has, in effect, been saying “be more like us” — only to give China the cold shoulder when it has ‘been more like us’ and asserted its economic power.
China’s assertiveness is not groundless. Given its extraordinary economic record, China has reason to feel proud; and, having long been a student of the West, China has more than enough reason to ask why the teacher is in such difficulties.
The academic accepts that a broken euro would be bad for China, leaving the US dollar as the single international reserve currency. China’s largest source of export demand — the European market — would also crumple.
But China will not provide substantial financial assistance without the EU’s ironclad guarantee of the investment. Equally important, China will withhold aid unless and until the EU meets certain conditions, including conferral of market-economy status.
China has said what it wants. It is up to Europe to strike the deal.
Why this latest offer with specific conditions?
Well, moving to the US (China’s second largest source of export demand), Chinese officials have no doubt be riled by this — a congressional report from the US Trade Representative marking China’s 10 year anniversary at a member of the WTO.
A flavour:
…in recent years, China seems to be embracing state capitalism more strongly, rather than continuing to move toward the economic reform goals that originally drove its pursuit of WTO membership…
In 2011, the prevalence of interventionist policies and practices, coupled with the large role of stateowned enterprises in China’s economy, continued to generate significant concerns among U.S. stakeholders. Major issues included China’s indigenous innovation policies, serious problems with intellectual property rights enforcement, and China’s slow movement toward accession to the WTO Government Procurement Agreement, as well as continued market access barriers and discrimination against foreign enterprises in numerous sectors of China’s economy…
Related link:
China Financial Markets — Michael Pettis