Friday, October 24, 2008

The Word from Beijing

As the Beijing summit opens, the "ASEAN plus Three" states (meaning Japan, Korea and China) have agreed to set up a regional fund of $80 billion to cope with the effects of the financial crisis. However, it is talk until it actually goes into operation--and that might not be until next summer 2009. But the fact that Japan and China were able to work together on this may bode well for how the new Japanese prime minister Aso might be able to rejuvenate Sino-Japanese ties.

Apparently, from reading press reports, a side benefit of the summit is that it is permitting all sorts of bilateral and multilateral contacts "on the spot"--so other agreements and understandings might be reached.

What is not clear--and may not be likely--is whether the EU will get a formal agreement that might end up connecting and unifying the EU's efforts with those of "ASEAN plus"--in advance of the summit for Washington next month.

I'll assess the end result of this summit and some of the other steps the EU has been taking in economic and foreign policy to wrap up the series with a "Should the EU Feel Confident" post next week.

An interesting example of the collapse of confidence I referred to in my comment on the previous thread is described in a Reuters report, which is I think worth quoting in full, because it makes explicit the link between this and the possibility of Chinese-European arrangements bypassing the U.S.

U.S. has plundered world with dollar, Chinese state paper rages

By Simon Rabinovitch
Friday, October 24, 2008

BEIJING -- The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.

The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.

A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order, the newspaper said.

The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper.

Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis.

"The grim reality has led people, amidst the panic, to realise that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University.

Shi, who has before been strident in his criticism of the U.S., said other countries had lost vast amounts of wealth because of the financial crisis, while Washington's sole concern had been protecting its own interests.

"The U.S. dollar is losing people's confidence. The world, acting democratically and lawfully through a global financial organisation, urgently needs to change the international monetary system based on U.S. global economic leadership and U.S. dollar dominance," he wrote.

Shi suggested that all trade between Europe and Asia should be settled in euros, pounds, yen, and yuan, though he did not explain how the Chinese currency could play such a role since it is not convertible on the capital account.

A two-day Asia-Europe Meeting of 27 EU member states and 16 Asian countries was set to open on Friday. Though few analysts expect much in the way of concrete agreements, Shi said it could prove momentous.

"How can Europe and Asia grasp each other's hands and together confront the once-in-a-century global financial crisis sparked by the U.S.? How can they construct a new equitable and safe international financial order?" he said.

"The world is waiting for this Asian-European meeting to achieve big results in financial cooperation."

(Original at
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