China won’t save the economies of Italy and the world
by Bernardo Cervellera
Many hope that Beijing might buy Italy’s and Europe’s sovereign debt; however, China’s economy has the same problems as that of the rest of the world: overproduction, export dependency, and overreliance on exports and foreign capital—add to that the yuan’s artificial value and an unfree workforce. Instead, China and Europe should heed Benedict XVI’s teachings, namely that man (not profits) and a sense of responsibility must be at the centre of the economy.
Rome (AsiaNews) – It will be difficult if not impossible for China to save Italy and Europe from its sovereign debt crisis. In recent days, the Financial Times ran a few stories saying that Rome and Beijing had reached a deal for the mainland to buy Italian treasury bills. Many economists and bankers reacted favourably to the news that China was coming to Europe’s rescue. Some predict that China would even save the world.
We cannot share this optimism. Speaking to World Economic Forum in Dalian, China’s premier Wen Jiabao said that his country would lend Europe a “helping hand” but he showed very little enthusiasm about paying for Europe’s debt. What is more, his conditions for help, like granting China ‘full market economy’ status as well as the elimination of tariffs, would be just the sign of another flood of Chinese goods.
Indeed, the numbers do not add up. If Beijing wants to help the European and world economies, it should lift its own tariffs on imported goods.
Looking at figures for 2010, China’s trade surplus with the rest of the world stood at US$ 184.4 billion. If Beijing wants to help the world pull out of this crisis, it must import more and its trade balance should be in negative territory. However, if it did this it would likely increase unemployment, which is already high and a source of headaches for China’s leaders.
It is true that with US$ 3 trillion in foreign exchange reserves, China is investing around the world. Italy and Europe could hope for some crumbs. However, if we look closely at the numbers, we see that if the mainland invested US$ 38 billion abroad in 2009, the rest of the world splurged US$ 106 billion in China (Source: UNCTAD). In short, Beijing takes more than it gives. And this surplus goes to help China to recapitalise its often insolvent banking system.
Placing any hope on China helping the world economy is unrealistic and flawed reasoning. China is in the same situation as the rest of the world, weighted down by overproduction, export dependency, overexposed banks, and compressed consumption. Its success lies on an artificially overvalued yuan and a cheap and unfree workforce.
With a doped economy, Chinese leaders have launched an ambitious infrastructure programme to boost gross domestic product. Contrary to expectations, this did not created any real wealth. More than half of all housing and office space lies vacant because no one can buy them.
China’s economy lacks something else: fantasy and creativity. For centuries, Chinese leaders held their culture within restrictive confines, stifling their people under imperial and then Communist control. Creativity instead needs freedom and human rights, another element that is still missing in today’s China.
China can pull off great shows—the Olympics, Shanghai Expo, Asia Games—but it cannot solve the problems of its people: the chaotic traffic in its megacities, pollution, quality of life and justice for its workers and farmers.
On his flight to Madrid for World Youth Day, Benedict XVI said that “man must be the centre of the economy and the economy cannot be measured according to the maxim of profit but rather according to the common good of all, that it implies responsibility for others and only really functions well if it functions humanly, with respect for others.”
China, but also Europe, has not placed man at the centre of things; their leaders lack a creative sense of responsibility. Both tend to seek solutions by dumping responsibility on the shoulders of some “economic saviour”.