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China’s Xie Runs Home to Fix Economy

As Dani Rodrik, who saw this item first, said, “Why do I think this is really bad news?” Remarkably, the article suggests that XIe might not attend the November 15 summit in Washington to discuss the future of the world financial order. This would be particularly noteworthy given China’s strong desire to push for a change in the currency regime.

From Bloomberg:

China’s Finance Minister Xie Xuren was called back from an international economic conference in Peru before the meeting began, following orders from Beijing to help resolve problems at home…

“They told him he has to resolve an economic problem and that he’s the only one who could do so,” de Swinnen said. “He was complaining because he had to fly 32 hours to get here and then he had to fly another 32 hours to get back.”

China’s largest banks, with 4 trillion yuan ($586 billion) of cash, are resisting government efforts to boost lending to 42 million small and medium-size companies that drove the economic boom of the past decade. On Nov. 2, the central bank scrapped curbs on loans after three interest rate cuts in seven weeks failed to revive economic growth that has sagged to its slowest in five years.

Half the nation’s toy exporters have closed this year, and 67,000 smaller enterprises filed for bankruptcy in the first half, according to government statistics. Companies with assets of less than 40 million yuan provide three-quarters of urban jobs and 60 percent of China’s gross domestic product…

Xie arrived in Beijing to take care of some “urgent business,” two finance ministry officials, who declined to be named, said today. They didn’t elaborate….

Xie will not attend the Group of Twenty meetings in Sao Paulo, Brazil, this weekend, one finance ministry official said. Xie’s attendance for next week’s Washington summit on financial crisis is yet to be confirmed, the official added.

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16 comments

  1. k

    Sigh…

    That’s what’s so bad if you can’t read Chinese and can’t get your official newsfeed every night from Xinhua News Agency.

    The big Kahuna himself, Chinese President HU Jing Tao, will attend G20 summit meeting held in D.C. next week.

    The news was released in headline yesterday.

    President Hu will also visit Costa Rica, Cuba, Peru and Greece afterwards.

  2. Anonymous

    It is a little bit nonsense. Finance minister in China does not wield real power to make final decision. The vice premier or premier himself responsible for the finance usually does.

  3. k

    Let me add a few more points. Most are personal thoughts, some are taken from what I read on the internet.

    1. There will be a hard landing in China. That’s so avoidance of that. The scale of this GLOBAL crisis is comparable, if not more than that of 1929. Still, Chinese government believe it can avoid a crash landing in China. I think they realize there’s a problem earlier this year, but the magnitude and speed of the crisis exceeds original estimation.

    2. I think they believe there will be tariffs and protective measures following new administration come to D.C. next year. The same can be said of Europe. We are seeing a rewinding of world history leading to WWI. There might be a total disintegration of ‘globalization’ in its current form. China, Korea and Japan will be hit hard by these development. Capital in developed countries will also face highly agitated labor force, whichi is triple squeezed by unemployment, rising goods price and dwindling retirement benefits.

    3. Ethnic conflict WITHIN A COUNTRY is highly possible. Europe is especially vulnerable. Large influx of Muslim population there will face increasing resentment from local population.

    4. Thanks to nuclear weapons and M.A.D., a wholescale world war is highly unlikely. But we will see increasing number of regional conflicts, some of those will inevitably be ‘proxy wars.’

    Hope this will cheer you up for a nice weekend.

  4. Anonymous

    From what I gather on other websites, Xie probably went back to settle a policy dispute INSIDE his ministry. That is why they said “he’s the only one who could do so”. If the dispute involves the bigger picture, then he just is not the one who can make the call, so no reason for him to be physically going back.

    But since he has to go back, it means that the dispute inside his department involves other high rank officials, probably the deputy level ministers. In that case, he IS the only one who can settle the issue since it is his territory.

    Another point is timing: A Central Conference on Economic Affairs will be held in November, and expectations are it will be decisive. On the agenda are fiscal expansion and monetary policy. Who do you think is the department to make fiscal policy proposals? Finance ministry!

    Thus, it seems that the officials from the finance ministry are debating on their policy proposals. They probably have a big fight about the policies so that only the head of the ministry can settle it. And about other internationa nonsense meeting…do you think Chinese Finance minister would put those internationa nonsense meetings above the real meeting in Beijing???

  5. Bob_in_MA

    Yves: This would be particularly noteworthy given China’s strong desire to push for a change in the currency regime.

    I hate to sound like an idiot, but what change does China desire? It’s seemed to me, they were one of the key players in what’s called Bretton Woods II system.

  6. ndk

    I thought this was referring to Andy Xie at first. They could probably use his help more…

    I hate to sound like an idiot, but what change does China desire? It’s seemed to me, they were one of the key players in what’s called Bretton Woods II system.

    Bob, China has had a lot of different desires at a lot of different times from a lot of different organs, so I don’t blame you for feeling some confusion. They are likely confused themselves. Yves is probably referring to the recent front-page editorial in the People’s Daily, reported here:

    http://www.nakedcapitalism.com/2008/10/china-launches-salvo-against-dollar.html

    Personally, I think their original plan was to handle currency adjustment mostly through domestic inflation rather than explicit devaluation. Events may have changed that.

  7. Max

    I remember, when W won the second term, the outsourcing industry in India was having parties that day, because the scenario of John Kerry’s promise to close the tax loopholes for the US companies that oursource their labor would not happen.

    It is something to think about now in India and China, with a pro-labor US president taking over next year. It kinda all happened at a wrong time for them. US re-alignment from consumption to production will not be painless for anybody, including the US.

  8. k

    “…with a pro-labor US president taking over next year.”

    Yes, President Obama is pro-labor all right. But ask yourself, after three or four years L-shaped deep recession(or depression), will the electorate still be pro-Obama? The electorate believe after a magic quick fix from Obama, they will have another Clinton golden era, but they may instead get another Carter malaise. What happen then?

    It won’t be “painless” indeed.

  9. Anonymous

    More on G20 agenda:

    http://www.forbes.com/reuters/feeds/reuters/2008/11/07/2008-11-07T175801Z_01_L7110206_RTRIDST_0_FINANCIAL-EU-UPDATE-5-PIX-TV.html
    “This is a global crisis and we have to remember where it started,” Sarkozy said.

    “The time when we had a single currency (the dollar), one line to be followed, that era is over and it came to an end on Sept. 18 when responsibility was taken without our opinion being asked with the failure of a major banking institution (Lehman Brothers (nyse: LEHMQ – news- people )), and the consequences all follow from that,” he said.”

  10. Anonymous

    “…after three or four years L-shaped deep recession(or depression), will the electorate still be pro-Obama?”

    It depends. Does he address the masses, without sugarcoating, to face the problems? Does he ask those well off to sacrifice ill gotten gains?

    One of the problems with Carter was he as a neophyte about how the game is played in DC. He was honest but a neophyte . . . I don’t think you can make the same case with Obama

  11. Bob_in_MA

    ndk, thanks, that was the omne weekend we were away!

    No matter how po’ed the Chinese are about the situation, I don’t see how they have a lot of room for maneuver. The time begin significant revaluation was two years ago or so.

    Also, I imagine that cooler heads there realize they had a hand in this by their aggressive accumulation of $ assets.

    I’ve wondered if 30 years from now people will consider the Chinese/Asian financing of exports at least as much to blame for the current situation as the loose Fed policy.

    It seems a bit of a chicken/egg dilemma to me.

  12. ndk

    I’ve wondered if 30 years from now people will consider the Chinese/Asian financing of exports at least as much to blame for the current situation as the loose Fed policy.

    I think a very, very strong case can be made for this already, as long as you include the petrodollar recycling flows. Greenspan’s “conundrum” was actually a very serious warning signal.

  13. luther

    “It seems a bit of a chicken/egg dilemma to me.”

    agreed, that’s a very astute way to look at it.

    let’s hope TPTB understand this before too long so as to avoid undue suffering on top of the suffering already bubbling below the surface.

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