x Abu Dhabi, UAEWednesday 24 January 2018

An opportunity for China's new leadership role

The Apec summit gives China an opportunity to act on the economic crisis. The Americans and the Europeans should offer them every incentive.

Heads of government of the 21 members of the Asia-Pacific Economic Cooperation forum meeting in Hawaii this weekend were supposed to focus on ways to expand trade around the Pacific Rim. But the slow blossoming of prosperity from freer trade could not overshadow the rapid-fire developments of Europe's debt crisis, with speculation about the euro jostling its way to centre stage in Honolulu.

In the current climate, a proposed Apec free trade zone may take a back seat. European countries may not be Apec members, but there are no firewalls in today's global economy. The meeting, which concludes today, is being watched, in particular, for signals of China's willingness - or lack of willingness - to pull its weight in the collective work of moving the global economy toward stable growth.

Could China be convinced to buy a large quantity of euro-denominated bonds, thereby soaking up some of the risk now sloshing around dangerously, roiling markets and toppling governments?

The case for China to do this, or otherwise pitch in, is more than plausible. Its $3.2 trillion (Dh11.75 trillion) in foreign exchange reserves give China the liquidity that western governments lack. The world's leading exporter has a powerful interest in preventing a global recession or depression. China also finds the euro useful - and so worth sustaining - as part of a multipolar world economy. And stepping in this way would be a source of prestige for the Chinese government and people.

This idea, while not new, is surely a ray of sunshine cutting through all the recent euro-gloom. But arduous negotiations would be needed, and they have not started well, to judge by a Reuters report saying China has mentioned conditions for helping to ease the crisis - and that the Europeans have shown little interest.

"We are willing to help, but we are not a charity," an unnamed "source with [Chinese] leadership ties" told the news agency.

Specifically, China is said to want some combination of more influence at the International Monetary Fund, inclusion of the yuan in the IMF's special drawing rights currency unit, better status within the World Trade Organisation and the lifting of a European arms embargo.

The devil is always in the details but these are not grotesque demands, They need to be negotiated, but broadly they merely reflect the stature China has already attained in the world.

European leaders can ill afford excessive pride; they have good reason to explore the possibilities further with the Chinese.