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China Responsibility” Pronouncement Unsound

[Editor’s note: In this Xinhua commentary, influential Chinese scholars (Xinhua writers Cao Xiaofan and Gu Ye) complained about the Western media’s latest pronouncement about China: “It’s China’s responsibility.” This comment has become the focus of intense interest ever since China surpassed Japan to become the world’s number two economy. Some Chinese scholars believe that holding China “responsible” is a “trap” for China. They believe that this recent pronouncement is more subtle and potentially more damaging than earlier, more inflammatory descriptors propagated by the West, such as “The China threat” and “China’s imminent collapse.” The following is a translation of the Xinhua article] [1]

Beijing, Aug 19 (Xinhua) — Right after pushing China into the chair titled “the world’s largest energy consumer,” the Western media started heralding the news that “China is the world’s second largest economy,” based on Monday’s (Aug 16) announcement of the second-quarter GDP comparison between Japan and China.

Analysts point out that the Western media are actively sabotaging China by flattering and exaggerating China’s strength and influence. They frequently trot out other catch phrases regarding Chinese “responsibilities,” such as its “surplus responsibility,” “debt obligation,” “exchange rate responsibility,” “savings liability,” “energy consumption responsibility,” and “carbon omission liability.” … They are doing this to force China to adjust its policies according to Western standards, to get China to assume more international responsibility, and to curtail China’s development.

Compared with earlier unflattering claims, such as “The China threat” and “China’s imminent collapse,” declaring that China is “responsible” is more subtle and potentially more damaging. According to Yang Zhiyong, a research fellow from the Institute of Finance and Trade Economics of the Chinese Academy of Social Sciences, if these allegations are true, then it is not just that China should not bear the blame for the current international financial crisis, but it could also be pushed into the trap of taking much more international responsibility beyond China’s capability.

Professor Ji Qiufeng from Nanjing University’s Institute of International Relations said that claims of “It’s China’s responsibility” started appearing before the current financial crisis and became more popular during the crisis. It is a propaganda technique wielded by Western countries to blame China for the financial crisis.

Ji Qiufeng’s analysis indicates that, in 2007, prior to the global financial crisis, some U.S. researchers coined the “Chimerica” concept, saying “the two countries are interdependent and form a major driving force for the world economy.” However, after the financial turmoil, China reduced its dependence on the U.S. market while the U.S. dependence on the Chinese market increased, and the balance necessary to sustain “Chimerica” was lost. This led the U.S. to make a request to “re-balance” the two countries, which means China should assume more responsibilities. This led to the widespread talk about “China’s responsibility.”

Ji Qiufeng said that when China did not want to assume the responsibility imposed by the West and asked the West to do its own share, Western media came up with the sound bite: “The arrogance of China.” When the West was hit by recession, its media trotted out: “China’s prosperity.” Whatever “claims” the Western countries invent, it is a way for them to impose their own responsibilities onto China. It has taken many forms, such as the RMB exchange rate, trade, U.S. Treasury bonds, and the carbon emission issue. This is the essence of “It’s China’s responsibility.”

In this lengthy debate about “China’s responsibility,” some scholars, media, and governments have often accused China of “deliberately maintaining a huge trade surplus,” “manipulating the RMB exchange rate,” “purposely holding a huge amount of U.S. Treasury bonds,” and “insufficient domestic consumption, creating high savings.” In their opinion, these practices eventually led to global economic imbalances.

Zhang Xiaojing, Director of the Macroeconomics Research Center of the China Academy of Social Sciences, believes that such blame is clearly unjustified. “Global economic imbalances are definitely not caused by any single country. It is not fair to blame China,” he said.

About trade surplus, Yang Zhiyong pointed out an important reason for the trade imbalance between the U.S. and China is that the U.S. imports a large amount of Chinese goods, while imposing strict restrictions on the sale of high-tech products to China.

According to data from the Ministry of Commerce, in recent years China’s imports of high-tech products have grown rapidly, but from 2001 to 2009, the imports from the U.S. decreased from 18.3 to 7.5 percent. If projected based on the 2001 import ratio, in the year 2009 alone, the U.S. lost at least 33 billion U.S. dollars worth of exports to China.

Regarding “debt obligation,” the U.S. pushed China into a “Catch 22” situation.  Zhang Erzhen, director of the Institute for International Economics at Nanjing University, said that, in the case of China’s huge holdings of U.S. treasury bonds, Americans hold several different opinions. Some have asked China to buy more U.S. Treasury bonds in order to share responsibility for the crisis in the U.S., or to rescue the U.S economy. Others believe that allowing China to hold too much in U.S. Treasury bonds will give China the power to manipulate or to harm the United States. In fact, claiming that it is “China’s responsibility” is setting a trap for China. If China comes to the rescue, it has to assume all the responsibilities; if China refuses to help, then China is irresponsible.

After the financial crisis, China quickly participated in multilateral coordination of international economic activities, including G20; adopted a proactive domestic fiscal policy; and loosened monetary policy to ensure growth and expansion of domestic demand. China played a significant role in the global economic recovery. China also introduced many “energy saving and emission reduction” measures after the Climate Conference in Copenhagen. These actions demonstrated the responsible behavior of a big country.

Zhang Xiaojing told reporters, “Given the background of global economic recession, China’s own economic growth itself is a great contribution to world economic recovery and stability. In addition, the massive government investment under our economic stimulus plan has greatly bolstered imports; it has played a vital role in helping the global economy out of recession.”

In recent years, in response to the global warming issue, China has adopted a series of effective measures: adjusting its economic structure, transforming the development mode, advancing energy conservation, improving energy efficiency, optimizing energy structure, and promoting the planting of forests. Data shows that from 1990 to 2007, global carbon dioxide (CO2) emissions per unit of output decreased by 15.4 percent; the CO2 emissions in the U.S. dropped by 27 percent; and in the developing countries they declined by 10.2 percent on average, while in China the CO2 emissions decreased by 49.2 percent.

In 2010, China’s government introduced a series of initiatives including further eliminating obsolete production facilities, imposing punitive tariffs for super-energy consuming businesses, etc. China is making a continuous effort to accomplish the goal to reducing carbon emissions per unit of GDP by 40% to 45 percent from 2005 to 2020.

Experts believe that the rapid growth since the reform and opening up policy caused China’s economy to rise rapidly, and that its trade surplus and foreign currency reserve both rank Number One in the world. Although China has made it to the center of the world economic stage, it remains a developing country.

One indisputable fact is that China’s per capita GDP is only US$3,700, and it ranks below 100th in the world. This is a big gap compared to Japan’s US$40,000 per capita GDP. Calculated by U.N. standards, 150 million people in China live below the poverty line. China should only have to bear international responsibilities within its capabilities.

Ji Qiufeng believes that China should be the decision maker when it comes to whether or not to take on any of these responsibilities. It could take appropriate international responsibility at the right time and under the right conditions, but it first must be able to handle its domestic responsibilities. China has participated in effective international cooperation in many areas, such as energy, combating transnational crime, fighting terrorism, reducing nuclear proliferation, and Western Pacific regional security. When facing unreasonable demands from the Western countries, such as “one-time revaluation of the RMB” and an “emission reduction quota for China,” China must object, based on facts and logic.

[1] Xinhua, August 19, 2010