Column

Reading Chinese media narratives about the current global economic crisis, particularly since the summit last week of G-20 leaders in London, might lead one to conclude that China has already taken its well-deserved place at the high table of global economic powers.

Much was made of the fact that president Hu Jintao was front and centre — quite literally — at the summit, including in official photograph sessions and at the banquet at 10, Downing Street, where he was assigned the seat with the most bragging rights: to the host’s immediate right. The fact that China stepped up to recapitalise the International Monetary Fund and has unveiled a massive stimulus package as part of a globally synchronised effort to resuscitate a world in recession are being projected as symbols of an emerging new economic order in which China will do its fair share of heavy lifting.

Some of these excessively triumphalist celebrations of China’s emergence are premature: China, which accounts for only about 6 per cent of global GDP, still has some way to go — in managing its domestic social disparities and in the way it deals with viewpoints that go against the official grain — before it can justifiably walk with a swagger.

That said, however, there’s no denying that the tectonic plates of global economic power are shifting, with the rapid ascendance of emerging economies — principally in Asia, but in other regions as well. And as the largest of these emerging economies, with its capacity to alter the framework of global manufacturing by its sheer scale, China certainly looks set to harvest a disproportionate share of economic influence going forward.

That it is one of the few large economies that has the luxury of surpluses — at a time when most others have blotted their balance sheets with the bloody hue of gigantic deficits — strengthens China’s voice at this moment. If it’s true, as the saying goes, that he who pays the piper calls the tunes, the big daddies of the global economy are standing by to burst into Peking Opera tunes.

Chinese leaders, however, appear to be as acutely aware of their country’s limitations as of its strengths and are therefore preparing China and its people for a time when it might flex its economic muscle to greater effect. For instance, the current financial meltdown and global economic downturn has taught China an important lesson on the folly of hitching itself too closely to the economic fortunes of developed countries. When the going was good and the developed world was on a consumption binge, China profited by positioning itself as the world’s factory.

However, when that party ended, and the bottom fell out of China’s export market, it revealed a glaring asymmetry in China’s growth model. Attempts by Chinese leaders to make up for the fall-off in exports by stimulating domestic demand haven’t really taken off for the reason that for all the awe-inspiring headline GDP growth of the past 30 years, large sections of the Chinese population just don’t feel rich or ready to consume.

In a country where the “iron rice bowl” — the cradle-to-grave social welfare system that existed prior to the country’s opening up — has been shattered, the primary impulse of anyone other than the new-rich is to save for everything from old-age income security to healthcare to education.

Unsurprisingly, therefore, China’s leaders have identified the restoration of the tattered social safety net as one of the priority areas for policy action. Just this week, they outlined the contours of a health reform proposal that, although short on details for now, constitutes an ambitious effort at providing universal affordable healthcare. The goal is to establish a healthcare network that, by 2020, will cover every man, woman and child in China.

China’s 2020 vision extends to other areas as well. In the run-up to the G-20 summit, there were shrill articulations by China’s top policymakers of a need for an alternative to the US dollar as a global reserve currency.

Although it was as much a cry of despair over China’s having bet excessively on the US dollar, and although the practicality of having an alternative reserve currency in the foreseeable future is in serious doubt, it signalled an eagerness on China’s part to move towards an internationalisation of the Chinese renminbi, and perhaps even float it as a global reserve currency of the future.

That’s still a long way off, given that the renminbi isn’t anywhere close to being fully convertible (and that Beijing hasn’t gotten over its primal instinct to depreciate its currency to boost its exports). Yet, taken together, these and other policy actions and proposals point to an earnestness of purpose among Chinese leaders to structurally change the nature of China’s economy, perhaps as early as 2020, and prepare the country for a time when it might be called upon to sit at the high table.