The Sunday Mail
BUOYED by its economic might, China is beginning to play a critical role in shaping the new global economic order. Beijing’s intervention around the world is decidedly different from how the Bretton Wood’s institutions have conducted business. The onerous strings attached to loans from the World Bank and the International Monetary Fund (IMF) have been disturbing. Below is an article that shows how the West is fretting at the emergence of China as the world’s influencial economic power.
Thanks to China, Christine Lagarde of the International Monetary Fund, Jim Yong Kim of the World Bank and Takehiko Nakao of the Asian Development Bank may no longer have much meaningful work to do.
Beijing’s move to bail out Russia, on top of its recent aid for Venezuela and Argentina, signals the death of the post-war Bretton Woods world.
It also marks the beginning of the end for America’s linchpin role in the global economy and Japan’s influence in Asia.
What is China’s new Asian Infrastructure Investment Bank if not an ADB killer?
If Japan, ADB’s main benefactor, won’t share the presidency with Asian peers, Beijing will just use its deep pockets to overpower it.
Lagarde’s and Kim’s shops also are looking at a future in which crisis-wracked governments call Beijing before Washington.
China stepping up its role as lender of last resort upends an economic development game that’s been decades in the making.
The IMF, World Bank and ADB are bloated, change-adverse institutions. When Ukraine received a US$17 billion IMF-led bailout this year, it was about shoring up a geopolitically important economy, not geopolitical blackmail.
Chinese President Xi Jinping’s government doesn’t care about upgrading economies, the health of tax regimes or central bank reserves.
It cares about loyalty. The quid pro quo: For our generous assistance we expect your full support on everything from Taiwan to territorial disputes to deadening the West’s pesky focus on human rights.
This may sound hyperbolic: Russia, Argentina and Venezuela are already at odds with the US and its allies. But what about Europe? In 2011 and 2012, it looked to Beijing to save euro bond markets through massive purchases.
Expect more of this dynamic in 2015 should fresh turmoil hit the euro zone, at which time Beijing will expect European leaders to pull their diplomatic punches.
What happens if the Federal Reserve’s tapering slams economies from India to Indonesia and governments look to China for help?
Why would Cambodia, Laos or Vietnam bother with the IMF’s conditions when China writes big cheques with few strings attached?
Beijing’s US$24 billion currency swap programme to help Russia is a sign of things to come.
Russia, it’s often said, is too nuclear to fail. As Moscow weathers the worst crisis since the 1998 default, it’s tempting to view China as a good global citizen.
But Beijing is just enabling President Vladimir Putin, who’s now under zero pressure, to diversify his economy away from oil.
The same goes for China’s US$2,3 billion currency swap with Argentina and its US$4 billion loan to Venezuela.
In the Chinese century, bad behaviour has its rewards.
If ever there were a time for President Barack Obama to accelerate his “pivot” to Asia it’s now.
There’s plenty to worry about as China tosses money at (supposedly) rogue governments like Sudan and Zimbabwe.
But there’s also lots at stake for Asia’s budding democracies.
The so-called Washington consensus on economic policies isn’t perfect, but is Beijing’s model of autocratic state capitalism with scant press freedom really a better option?
With China becoming Asia’s sugar daddy, the temptation in, say, Myanmar might be to avoid the difficult process of creating credible institutions to oversee the economy.
There could be a silver lining to China lavishing its nearly US$4 trillion of currency reserves on crisis-plagued nations: It might force the IMF, World Bank and ADB to raise their games.
Competition, as Lagarde, Kim and Nakao would agree, is a good thing.
But more likely, China’s largess will encourage bad policy habits and impede development in ways that leave the global economy worse off. – Bloomberg.
