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Walker's World: China at Davos

File image courtesy AFP.
by Martin Walker
Washington (UPI) Jan 28, 2009
China canceled a scheduled summit with the European Union last year to show its distaste for the decision by French President Nicolas Sarkozy, who then held the rotating presidency of the EU Council, to meet with the Dalai Lama, spiritual leader of Tibet.

This followed an earlier snub of German Chancellor Angela Merkel for the same offense the previous year. China's Foreign Ministry called it "a rude interference into China's internal affairs and strongly hurt the feelings and emotions of the Chinese people, but also gravely harmed China-Germany relations."

All, or almost all, is forgiven. Chinese Premier Wen Jiabao arrived in Europe Tuesday for a visit that Chinese Foreign Ministry officials have described as a "Journey of Confidence." He starts at the World Economic Forum's annual gathering in Davos, Switzerland, followed by meetings with Merkel in Berlin, U.K. Prime Minister Gordon Brown in London, the Spanish government in Madrid and top EU officials in Brussels.

Paris remains off limits, and the French are still being punished. Still, the Europeans as a whole are being courted, largely because they now constitute China's biggest export market, taking in some $200 billion of Chinese goods, while China buys about $90 billion from the EU in return, almost half of that total from Germany alone.

Moreover, the Europeans are now China's leading source of Western technology. According to official Chinese statistics, as reported by Xinhua, the EU accounted for 40 percent of China's technology imports last year, which includes licenses and software as well as high-tech equipment. Europe's tech exports to China were worth almost $9 billion, compared with $5 billion for Japan and $4 billion for the United States.

In short, the Europeans are becoming the goose that lays the golden eggs for China. So the Beijing leadership evidently has decided to smooth relations, while still demonstrating its need to put the French in their place. Beijing's diplomatic signals can be very obvious.

But something has changed. A year ago, when the financial crisis had just started its long assault on the world's stock markets, China was the great hope. It was fashionable to talk of "decoupling," the theory that said China was now able to grow independently of the export markets of the West. That theory was wrong. China's economy is now in serious trouble.

China claims 8 percent growth last year and growth of 6.8 percent in the final quarter. That's only true if the comparison is with the fourth quarter of 2007. Compare it with the third quarter of 2008, and it looks to most Western analysts as through growth plunged to zero or less (suggests Morgan Stanley) and 1 percent (suggests Standard Chartered).

Economist Nouriel Roubini, known as Dr. Doom for his gloomy but accurate forecasts, noted over the weekend that growth in China in the last three months "would be close to zero if not negative. Other data confirm that China was in a borderline recession in Q4 and that it may be in an outright recession in Q1: production of electricity plunged 7.9 percent in year on year basis."

Other analysts suggest China's hitherto inexhaustible appetite for oil shrank by 4 percent in December and that with its petroleum inventories rising sharply, real demand may have been even lower. Only 18 months ago the International Energy Agency predicted China would be buying an extra 500,000 barrels of oil a day this year.

These are not the news stories that Wen wanted to read as he arrived in Switzerland for the Davos economic conference. He was hoping to see admiring reports of China's claim to have surpassed Germany as the world's No. 3 economy, behind the United States and Japan, with a gross domestic product of $3.5 trillion, compared with Germany's $3.3 trillion.

If there were going to be any negative headlines, the Chinese leaders expected they would be over the usual pressures on China to relax its hard line on Tibet and domestic dissidents, or to volunteer tougher measures of emissions controls, since China is now the world's biggest producer of greenhouse gases. Wen had an answer for that: China is currently building more than 20 advanced factories to manufacture batteries for non-polluting electric cars.

But he does not have much of an answer for the gloomy news of China's economic slowdown, except to point to the $586 billion stimulus program his government announced last year and Beijing's readiness to coordinate recovery strategies with the Group of Seven developed economies.

"Wen's visit will demonstrate China's confidence in developing its comprehensive strategic partnership with European countries," said a Foreign Ministry briefing. "Demand from China and its economic growth will serve as an impetus for the world economy to recover from the downturn. Wen's visit will surely enhance the confidence of the international community to jointly address the economic woes in the spirit of cooperation and coordination."

Only don't invite the French just yet.

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Wen and Putin lash out at US over economic crisis
Davos, Switzerland (AFP) Jan 28, 2009
Chinese and Russian leaders Wen Jiabao and Vladimir Putin on Wednesday blamed the United States for causing the global economic crisis on a gloomy first day of the Davos forum.







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