Tuesday, 28 April 2009


Chinese FM makes five-point proposal to boost Mideast peace, development


First, the concerned parties should adhere to the peace talks, and firmly promote the peace process on the basis of relevant UN resolutions, the "land for peace" principle, the "Road Map" plan, and the Arab peace initiative, Yang said.

Second, the parties should take positive measures to restore stability and accumulate mutual trust, so as to create conditions for the development of peace process.

Third, China believes the two-state solution should be maintained and calls for an early establishment of an independent Palestinian state and the two countries of Palestine and Israeli live in harmony.

"This is the ultimate way out for the Palestinian issue, which can give guarantee to the Middle East peace and security," Yang said.

Fourth, the international community should continue to pay due attention to the Middle East issue, and deliver its supports to the peace talks, the inner-Palestinian unity and economic growth.

Fifth, the peace negotiations between Palestine and Israel, Syria and Israel, Lebanon and Israel should advance in a coordinated way in order to achieve comprehensive peace across the Middle East region, Yang said.

"As a permanent member of the UN Security Council, China will continue to maintain close communication and coordination with parties concerned to play a constructive role in pushing for a comprehensive, just and lasting solution to the Middle East issue," Yang added.

Syria calls for closer ties with China

against economic crisis


China will continue to back Syria on its just cause of safeguarding its sovereignty and territorial integrity and hopes that Syria would realize its territorial unification in accordance with relevant UN resolutions, Yang said.

China hopes to expand friendly exchanges and cooperation with Syria and will continue to promote bilateral trade, investment and other pragmatic cooperation in energy, telecommunication and tourism, he said.

China will strengthen contacts and coordination with Syria in international and regional issues, and play a constructive role in help realize comprehensive, just and enduring peace across the Middle East region, he added.

Earlier on Sunday, Yang also held talks with his Syrian counterpart Walid Mualem, and they exchanged views on bilateral relations, and other major international and regional issues of common concern.

Monday, 20 April 2009


News Analysis:
How far will U.S. go in Mideast peace mission?

20 April, 2009
by Xinhua writer Zhu Lei

CAIRO, April 19 (Xinhua) -- U.S. Middle East envoy George
Mitchell did not find welcoming ears this time in nudging
new Israeli leaders to accept that a Palestinian state
alongside Israel is the only way to end the Mideast

During his third trip to the region since nominated by U.S.
President Barack Obama late January, Mitchell spared no
efforts in advocating the two-state solution in solving the
decades-old conflict.

But Mitchell's first meetings with top leaders of the new
Israeli government since it was sworn in on March 31
highlighted the split between the U.S. and Israeli peace
policy with the Palestinians.

The traditionally hawkish Israeli premier Benjamin
Netanyahu, who has paid little lip service to the peace
plan since assuming power, said in a statement that the
creation of a Palestinian state at the current stage is
premature and would play into the hands of Gaza Hamas

He also conditioned the start of talks on the two-state
solution on Palestinian recognition of Israel as a Jewish
state, a demand the Palestinians have rejected for fear of
that such a move would virtually deprive the Palestinian
refugees of their right to return.

The premier leading a right-leaning government recently
made repeated pledges to advance the peace process, but has
so far danced around the two-state principle.

The firebrand Foreign Minister Avigdor Lieberman, before
Mitchell's eyes, told reporters that "new ideas and a new
approach" are needed at the current circumstance,
criticizing the "traditional approach" which has yielded
few results.

Those counterpoints are all but the same messages that
Netanyahu and Lieberman have sent during their first 48
hours in office, which becomes a fast-moving concern for
the Obama administration, analysts said.

The new Israeli government has adopted a domestic and
foreign policy almost entirely opposed to that of the
United States, said Amjad Atallah, co-director of the
Middle East Task Force at the New America Foundation think

The policy differences concerning Israeli-Arab peace center
on two issues -- Israeli domestic policy toward its Arab
minority, which accounts for about 20 percent of Israel's
population and Israel's intent to occupy the Palestinian
West Bank and Syrian Golan Heights indefinitely, according
to Atallah.

Given its line-up and policies, the new Israeli
administration is seemingly ready to go head-to-head with
the Obama team and it is not going to be subtle, the expert

There is little sign of how Washington will engage Israel's
new leadership on such fundamental differences in policy,
Atallah said, noting that the longer Washington waits, the
harder it will be for the Israeli government to back down
from its positions.

Richard W. Murphy, an Adjunct Scholar at the Middle East
Institute think tank, believed that two forces -- radical
Palestinian forces led by Hamas and Israeli settlers'
imposition of their vision on politics, have raised high
the wall facing any mediator seeking a solution.

Yet little sign emerged that Washington would deal with
Hamas, which is blacklisted by the West as a terror group
and is actually one of the major players in the conflict.

Neither did Mitchell talk with Hamas nor set foot on the
Gaza Strip during his three trips to the region. Hamas
voiced complaint when Mitchell did not make any attempt to
contact the group during his first visit in January.

For Mitchell to have any success will require the
persistent focus and support by the U.S. president eager to
see progress after years of failed peace efforts, he said.

The Obama administration did show its intent and sincere
willingness to push forward Mideast peace in naming
Mitchell as the special envoy after it kept silent about a
22-day massive Israeli offensive on the Gaza Strip before
the inauguration.

A veteran diplomat, Mitchell in 2002 successfully set up a
reputation for impartiality on the Israeli-Palestinian
peace by calling for freezing Israeli settlement activities
and intensifying Palestinian efforts to crack down on

The new Israeli leadership, however, probably could not be
more forbidding for a U.S. administration seeking to be
pro-active on the Israeli-Palestinian peace front, said
Wayne White, an Adjunct Scholar with the Middle East
Institute think tank.

Combine that with the political split of Palestinians -- a
radical Hamas ruling Gaza and Palestinian moderates in the
West Bank, the picture looks even grimmer, he said, adding
that advancing the peace process is a hard sell even in the
best of times.

Analysts believe though the Israeli government has felt the
U.S. pressure on the Mideast peace, the two sides would not
plunge into freeze or confrontation due to their
traditional alliance and interest on the ground.

Thursday, 16 April 2009


China's Palestine Policy

Jamestown China Brief Volume: 9 Issue: 5 March 4, 2009

Category: China Brief, Foreign Policy, China and the
Asia-Pacific, Middle East, Home Page

By: Chris Zambelis

The geopolitics of China's rise and its implications for
the Arab world and wider Middle East is a topic for serious
debate. Currently, China's Middle East strategy revolves
around shoring up its energy security and tapping consumer
markets and investment opportunities for Chinese
businesses. Given China's status as the world's fastest
growing energy consumer and third-largest net importer of
oil coupled with the global financial crisis, energy and
commercial concerns will continue to dominate China's
interaction with the Middle East in the foreseeable future
[1]. Yet as China's economic clout grows, Beijing is also
keen on leveraging its economic power to enhance its
diplomatic influence on the international stage. To bolster
its great-power aspirations and its position in the Middle
East-a region where it played a peripheral role throughout
the Cold War-Beijing's diplomacy is forging closer
relations with key players in the region and, in doing so,
is challenging the status quo.

China's efforts to engage the region in recent years have
been welcomed with open arms on both the state and popular
levels. Regional governments, for instance, look to China
as a potential check on what they see as unrestrained
American dominance in the region, a feeling shared by many
staunch U.S. allies (China Brief, October 24, 2008; China
Brief, May 24, 2006). Furthermore, public sentiment in the
region tends to be harshly critical of many aspects of U.S.
foreign policy in the Middle East. China's growing inroads
into the Middle East, therefore, are also viewed in a
positive light, as many Arabs and Muslims see China as a
brotherly state (China Brief, May 18, 2007). Geopolitical
considerations and cultural affinities, however, are not
sufficient to explain the emerging China factor in Middle
Eastern affairs. China's successful engagement strategy
also derives from the general lack of enmity between China
and Arab countries on key global issues and its effective
use of soft power in its dealings with Arab partners (China
Brief, May 18, 2007).

China's historic role in supporting Third World
revolutionary movements and anti-colonial struggles in the
Middle East and Africa, to include its advocacy on behalf
of the Palestinians during the Cold War until the present,
has also led many in the region to see China as a potential
partner that can help further the Palestinian national
cause [2]. It was not until 1992 that China and Israel
established formal diplomatic ties, ties that have since
flourished despite Beijing's previous characterization of
Israel as an imperial aggressor acting at the behest of the
United States [3]. Nevertheless, widespread popular
opposition to U.S. foreign policy in the Middle East
coupled with feelings of nostalgia for a return of the
revolutionary China of old, Arab and Muslim proponents of a
greater role for China in Middle East politics see China's
rise as a positive trend, especially as it relates to the
question of Palestine [4].

Chinese-Palestinian Diplomacy

Chinese diplomacy in the Middle East is often imbued with a
discourse that emphasizes themes of mutual respect and
"South-South" cooperation and unity. As a developing
country that has charted its own path toward progress and
modernization and a country that is free of the colonial
taint of competing powers in the region, China is quick to
point out that it remains committed to championing the
causes of the developing world, to include the struggle for
Palestinian self-determination (China Brief, May 18, 2007).
Chinese leaders, for instance, conduct official diplomatic
visits to the "State of Palestine" as opposed to the
"Palestinian Territories" or the "West Bank/Gaza," labels
typically used by the United States and other countries in
official venues. China's reference to "Palestine" is a
symbolic but nevertheless important distinction; China's
reference to "Palestine" acknowledges Palestinian national
identity and, by extension, the territorial claims of the
Palestinians (Xinhua News Agency, January 10).

While always taking into account the significance of public
diplomacy and perceptions, Chinese leaders treat bilateral
exchanges with their Palestinian counterparts as major
diplomatic events on par with other high-level
state-to-state visits. In November 2008, Chinese President
Hu Jintao and Palestinian National Authority President
Mahmoud Abbas exchanged warm congratulations to mark the
occasion of the 20th anniversary of the formal
establishment of diplomatic relations between China and the
Palestinians. Hu mentioned that "China has always been a
staunch supporter of the rightful cause of the Palestinians
and the Mideast peace process;" Abbas reciprocated by
thanking China for "being a supporter of the rightful cause
of the Palestinians" (Xinhua News Agency, November 20,
2008). In a further attempt to showcase its image as an
advocate for the Palestinian cause and its willingness to
engage with Palestinians on its own terms, Beijing ignored
U.S. and Israeli opposition and welcomed Mahmoud al-Zahar,
a senior Hamas representative who served as Palestinian
foreign minister, during the June 2006 China-Arab
Cooperation Forum in Beijing (Xinhua News Agency, May 18,
2006). The United States and Israel consider Hamas to be a
terrorist organization. In contrast, China acknowledged the
legitimacy of Hamas' role as a legitimate representative of
the Palestinian people following the group's victory in the
January 2006 parliamentary elections. A statement by
Chinese foreign ministry spokesman Liu Jianchao clarified
Beijing's position regarding Hamas in light of U.S. and
Israeli opposition to China's dealings with the
organization: "We believe that the Palestinian government
is legally elected by the people there and it should be
respected" (China Daily, June 2, 2006).

China on the Gaza Crisis

China's reaction to Israel's December 2008 invasion of Gaza
and the resulting humanitarian crisis provides insight into
some of the reasons underlying China's popularity in the
Middle East when it comes to the question of Palestine. In
a January 16 speech during an emergency meeting of the
United Nations (UN) General Assembly, China's deputy
permanent representative to the UN Liu Zhenmin stated:

"China is seriously concerned over the escalation of
Israel-Palestine conflicts and is deeply worried about the
worsening humanitarian situation" and that "China condemns
any violence against civilians and is shocked and indignant
at Israel's attacks on UN schools, rescue vehicles, and a
UN compound. China demands that Israel ensure the safety of
UN personnel and other rescue personnel, urges Israel to
immediately stop its military operations and withdraw its
troops, open all cross-border checkpoints into Gaza, and
guarantee uninterrupted delivery of humanitarian aid into
Gaza; Palestinian armed factions must immediately stop
launching rockets" (Xinhua News Agency, January 16).

As a permanent member of the UN Security Council, China's
harsh criticism of Israel's actions in Gaza, which occurred
amid staunch American support for Israel's actions, is
another example of why many Arabs and Muslims are
optimistic about China's potential to challenge the United
States, Israel's main benefactor, and stand by the
Palestinians. In this regard, Arab and Muslim proponents of
a greater role for China in the Middle East hope that China
may one day use its influence at the UN and other
international bodies to offset American and, by extension,
Israeli influence in the region.

China on Israel's Occupation and Settlement Policies

China has been a harsh critic of Israel's continued
occupation of Palestinian land, including Israel's policy
of constructing settlements in the West Bank and East
Jerusalem, essentially the land Palestinians and the
international community envisage (along with Gaza) to serve
as an independent homeland. China has also been a harsh
critic of Israel's economic blockade of Gaza and the
ensuing humanitarian costs since Hamas took control of the
territory in 2007. While calling on both Israelis and
Palestinians to focus their efforts on forging a lasting
peace through diplomacy and compromise, China's Ambassador
to the United Nations Zhang Yesui stated, "China is deeply
concerned at the grave security and humanitarian situation
in Palestine and worried about the recent renewed eruption
of violent conflicts in the Gaza Strip and the rapid
deterioration of the humanitarian situation" (Xinhua News
Agency, November 25, 2008). Ambassador Yesui also stated
that the "continued construction of settlements by Israel
on the West Bank is not only in violation of Israel's
obligations under international law, but is also
detrimental to guaranteeing Israel's own security" (Xinhua
News Agency, November 25, 2008).

China on "The Wall"

China regularly chastises Israel for its controversial
construction of what Israel refers to as a "separation
wall" or "security fence" and Palestinians brand as a
"segregation wall" that traverses large swaths of the West
Bank. Palestinians and international opponents of Israel's
actions label the construction of the so-called "separation
wall" as a ploy aimed at annexing more Palestinian
territory prior to a final peace settlement under the guise
of securing Israeli territory from attack (Xinhua News
Agency, February 24, 2004). In a September 2006 statement
during a UN Security Council meeting on the Middle East,
China's foreign minister Li Zhaoxing called on Israel to
"dismantle the separation wall," which China views as an
obstacle to peace and stability (PRC Mission to the UN
Statement, September 21, 2006). China's position on
Israel's construction of its "separation wall" reflects the
2004 advisory opinion by the International Criminal Court
of Justice (ICJ) that declared the wall to be illegal [5].

A Balancing Act

On the surface, Beijing's rhetoric concerning the most
critical issues affecting the Palestinians suggests that it
is positioning itself as a check on Israeli and, by
extension, a check on American power in the Middle East. In
reality, an assessment of Chinese behavior suggests that
its Palestine policy is driven by pragmatic concerns that
are very much in line with the international consensus on
the Israeli-Palestinian conflict led by the United States.
For instance, China supports the principles outlined in the
various peace initiatives that have governed the
Israeli-Palestinian peace process over the years, such as
the 1991 Madrid Conference, 1993 Oslo Accords, 2002 "Road
Map," 2007 Annapolis Conference, among others. China's
vocal support for the Palestinian cause is also tempered
with calls for Palestinian militants to renounce all forms
of violence and terrorism, a far cry from the rhetoric and
behavior reminiscent of China's revolutionary days (China
Daily, May 31, 2006). In this regard, China's approach to
the question of Palestine is more complex and nuanced than
its rhetoric would indicate.

Sino-Israeli Ties

China today places a high-premium on its relationship with
Israel, a marked shift from the periods of hostility and
suspicion that characterized Sino-Israeli ties during the
Cold War. Israel also sees China as an important partner,
especially in the economic arena: China is Israel's largest
trading partner in Asia and the volume of trade between
China and Israel represents the sixth largest in the world
(Xinhua News Agency, November 8, 2006). China's vocal
criticism of Israel with respect to the question of
Palestine, the most recent criticism occurring during the
latest conflict in Gaza, appears to have done little to
scuttle one of the world's most robust trading
relationships, and there are no indications that China (or
Israel) is interested in seeing this dynamic change.
Moreover, China's close relations with Iran, Syria, and
other Israeli rivals in the region also seem to have had a
negligible impact on the development of Sino-Israeli ties,
especially in the economic realm (China Brief, October 24,
2008). During a September 2007 reception marking the 58th
anniversary of the founding of the People's Republic of
China (PRC) at the Chinese Embassy in Israel, Chinese
Ambassador to Israel Zhao Jun underlined the central role
of trade in cementing Sino-Israeli relations: "As has been
shown, China's sound and steady economic growth has not
only benefited its 1.3 billion people, bus also offered
enormous business opportunities to other countries,
including and particularly Israel, whose economic structure
complement that of China" (Xinhua News Agency, September
24, 2007).

China's quest for advanced technology, especially
defense-related technology and weapons systems, and
Israel's aggressive export efforts in these sectors,
underlie Sino-Israeli economic relations. China has found a
willing partner in Israel to help further its ambitious
efforts to modernize its military and bolster its
technological prowess. At the same time, the Sino-Israeli
trade in advanced military-related technology and weapons
systems has been fraught with controversy, contributing to
severe strains in U.S.-Israel relations (China Brief,
January 24, 2007) [6]. The United States worries that
advanced defense technologies supplied by Israel to China
may someday provide China with an advantage against its
rivals in Asia, including U.S. allies such as Taiwan, thus
further tipping the balance of power in Asia. Advanced
technologies and weapons systems supplied by Israel to
China also have the potential to be used by China against
the United States in a future confrontation between Chinese
and American forces. China's record of proliferating arms
and weapons systems also worries U.S. planners, since China
may repackage advanced Israeli defense technologies for
resale to America's rivals across the globe. Israel is
reported to be China's second-largest arms supplier (with
Russia being the first source). The controversy over
Sino-Israeli defense ties is exacerbated considering that
the United States remains Israel's largest supplier of arms
(Taipei Times, December 30, 2008).


As China continues to spread its influence across the
Middle East, there will be increasing calls among Arabs and
Muslims for China to adopt a more assertive posture in its
advocacy on behalf of the Palestinian national cause.
Despite its revolutionary history and rhetoric, however,
China's soft-power diplomacy and growing economic inroads
into the Middle East suggest that it is likely to continue
to maintain a balancing act when it comes to the question
of Palestine, at least in the foreseeable future. China's
approach in its relationship with Israel also suggests that
the further development of Sino-Israeli ties remains a top
priority in Beijing, a factor that will profoundly impact
Chinese foreign policy in the region. At the same time, as
a rising power on the international stage, a major shift in
regional (or global) dynamics down the line may prompt
China to change course with respect to the Palestine
question and its overall approach to the Middle East.

[The opinions expressed here are the author's alone and do
not necessarily reflect the position of Helios Global,


1. Xin Ma, "China's Energy Strategy in the Middle East,"
Middle East Economic Survey, Vol. LI, No. 23, June 9, 2008.
2. For a discussion of China's anti-imperialist
revolutionary credentials with the respect to the
Palestinian question, Arab nationalism, and Israel more
generally, see John K. Cooley, "China and the
Palestinians," Journal of Palestine Studies, Vol. 1, No. 2,
(Winter 1972), pp. 19-34. 3. For a discussion on the
evolution of Israel-China relations, see E. Zev Sufott,
"The Crucial Year 1991," in Jonathan Goldstein, China and
Israel, 1948-1998: A Fifty Year Retrospective (Westport:
Praeger, 1999), pp. 107-126. 4. Popular opposition to U.S.
foreign policy in the Middle East is also apparent among
Muslims outside of the Middle East. See
WorldPublicOpinion.org, "Public Opinion in the Islamic
World on Terrorism, al Qaeda, and US Policies," The Program
on International Policy Attitudes, University of Maryland,
February 25, 2009,
For more recent polling data indicating favorable Arab
perceptions of China versus unfavorable opinions of the
United States, see "2008 Annual Arab Public Opinion Poll,"
Survey of the Anwar Sadat Chair for Peace and Development
at the University of Maryland (with Zogby International),
March 2008,
5. International Court of Justice, "Legal Consequences of
the Construction of a Wall in the Occupied Palestinian
Territory," Press Release, 2004/28, July 9, 2004,
www.icj-cij.org/docket/index.php. 6. Also see P.R.
Kumaraswamy, "Israel-China Relations and the Phalcon
Controversy," Middle East Policy, Vol. 12, Iss. 2, (Summer
2005), pp. 93-103; Nuclear Threat Initiative, "China's
Missile Imports and Assistance from Israel," March 28,
2003, www.nti.org/db/china/imisr.htm.

Tuesday, 14 April 2009


Chavez says China part of 'new world order'

BEIJING (AP) — Venezuelan President Hugo Chavez says his two-day visit to Beijing this week is part of the creation of a "new world order."

The frequent U.S. critic, who met with China's president and Communist Party leader Hu Jintao on Wednesday, told reporters that power in the world was shifting from America to countries such as Iran, Japan and China.

"We are creating a new world, a balanced world. A new world order, a multipolar world," Chavez said after arriving Tuesday evening.

"The unipolar world has collapsed. The power of the U.S. empire has collapsed," he said. "Everyday, the new poles of world power are becoming stronger. Beijing, Tokyo, Tehran ... it's moving toward the East and toward the South."

Chavez continued his theme in his meeting with Hu, telling the president that "no one can be ignorant that the center of gravity of the world has moved to Beijing."

"During the financial crisis, China's actions have been highly positive for the world. Currently, China is the biggest motor driving the world amidst this crisis of international capitalism," Chavez said in preliminary remarks before reporters were ushered from the room.

Chavez has made Beijing a frequent stop in his global travels to promote his agenda of anti-American world unity, stopping in the Chinese capital six times since taking power in 1998 elections.

His visit follows a sweep through the Middle East last week, including a stop in Iran where he said he has little hope of better relations with Washington under President Barack Obama because the United States was still acting like an "empire" in his eyes.

While China's Communist leaders have been low key in their response to Chavez's political rhetoric, Beijing's state-run industries have been eager to use Venezuela as a jumping-off point for their entry into South America. Chinese companies in the mining and petroleum sector have been especially eager to secure South American mineral resources.

During his visit, Chavez said he planned to review with Chinese leaders a goal of boosting exports of Venezuelan oil to China from 380,000 barrels last year to 1 million barrels by 2013 — part of Venezuela's strategy of diversifying oil sales away from the United States, which buys about half the South American nation's heavy crude despite political tensions.

Included in that strategy are plans for China and Venezuela to build four oil tankers and three refineries in China capable of processing Venezuela's heavy, sulfur-laden crude.

China and Venezuela have also invested in a $12 billion fund to finance joint development projects in areas including oil production, infrastructure and agriculture.

Wednesday, 8 April 2009


China, Venezuela to step up co-op in bid
to curb global financial crisis

Chinese President Hu Jintao (R) meets with Venezuelan President Hugo Chavez at the Great Hall of the People in Beijing, capital of China, on April 8, 2009. (Xinhua/Rao Aimin)

Chinese President Hu Jintao (R) meets with Venezuelan President Hugo Chavez at the Great Hall of the People in Beijing, capital of China, on April 8, 2009. (Xinhua/Rao Aimin)
Photo Gallery>>>

BEIJING, April 8 (Xinhua) -- China and Venezuela agreed here Wednesday to step up cooperation in fields such as energy, agriculture, and high technology and take joint actions in the face of the global financial crisis.

The agreement was reached in a meeting between Chinese President Hu Jintao and his visiting Venezuelan counterpart Hugo Chavez. The Chinese Foreign Ministry said the two exchanged in-depth views on bilateral relations and other issues of common concern and reached an important consensus.

Hu highlighted the robust growth of bilateral relations during the meeting, saying that China was satisfied with the positive outcomes from bilateral economic and technological cooperation, progress made on some key projects and close coordination on international and regional issues.

Hu also suggested the two nations should work closer and boost the various pragmatic cooperation, which would not only help resolve the impact from the international financial crisis, but also be conducive to laying a solid foundation for the long-term development of Sino-Venezuelan relations.

China highly values its ties with Venezuela and will join hands with the Venezuelan side to make efforts to push forward the bilateral strategic partnership to a higher level, Hu said.

Echoing Hu's views on bilateral relations, Chavez also applauded the progress made on bilateral cooperation in energy, agriculture, industry and technology.

He especially mentioned the successful launch and delivery of Venezuela's first telecommunication satellite thanks to cooperation with China.

Chavez noted that the world order is undergoing a profound change and China already played a significant and positive role in an effort to address the challenges posed by the international economic turmoil.

Venezuela is willing to cement its cooperation with China in such a new international context, the Venezuelan president added.

As Hu's guest, Chavez arrived in Beijing on Tuesday night for a three-day working visit.

He will also meet Chinese Vice President Xi Jinping during the visit, which is his sixth to China.

Monday, 6 April 2009


'A wider order comes into view'

By Quentin Peel

April 6 2009

Financial Times

[emphasis added - FoC]

It may take months to discover whether the actions taken by

last week's Group of 20 summit in London are enough to

rescue the world economy from a prolonged recession, if not

depression. The substance of its conclusions will have to

convince capital markets, global financial institutions,

investors and humble consumers that they can start to

spend, borrow or lend again.

But the symbolism of the event may be more important than

the substance. For even if the G20 countries are a strange

ad hoc selection, initially brought together by the Asian

financial crisis in 1997, they represent a whole new

element in the world order. They are not the Group of Seven

- the club of western powers and Japan - or the G8 (the G7

plus Russia). The use of the G20 at this moment of global

crisis is a clear indication that the old order has

outlived its time.

Another pointer came four months ago when the US National

Intelligence Council, part of Washington's security

apparatus, published a startling forecast. The

international system as constructed after the second world

war would, it predicted, be "unrecognisable" by 2025,

thanks to globalisation, the rise of emerging powers and

"an historic transfer of relative wealth and economic power

from west to east".

"The next 20 years of transition to a new system are

fraught with risks," the document declared. "Strategic

rivalries are most likely to revolve around trade,

investments and technological innovation and acquisition,

but we cannot rule out a 19th-century scenario of arms

races, territorial expansion, and military rivalries."

That report was largely written before the full force of

the financial and economic crisis had become apparent.

Nevertheless, its authors were convinced that the "unipolar

moment" of unchallenged US hegemony after the Berlin Wall

came down was already drawing to an end. The future world

order would be "multipolar".

The extraordinary thing about the present moment is that

several fundamental adjustments are taking place at the

same time. That is what makes the outcome so unpredictable.

The end of the cold war, with the fall of the Wall in 1989,

cleared the way for new powers to rise - China and India in

particular - and removed ideological obstacles to

globalisation. Cross-border migration has surged. The

technological revolution of the internet has transformed

international communications, the flow of information,

financial trading and political awareness. The breakdown in

the global financial system, caused not just by the bubble

that burst in the US subprime mortgage market but also the

explosion of financial speculation across world markets,

has rapidly turned into a recession in the real economy. No

one has been spared. Credit has frozen up in markets from

Africa to eastern Europe.

A massive rebalancing is starting to take place in world

trade flows between the unsustainable US trade deficit and

the equally unsustainable surpluses of China and other big

exporters. US consumers are no longer going to be the

engine for Chinese export-led growth, but nor can Chinese

savers continue to finance American borrowing.

Finally there is the underlying adjustment - one that would

normally still take decades to be realised - that the NIC

report identifies, of the switch in power from west to

east, especially the rise of China and India to reassume

the prominence they held when Europe was in the Dark Ages.

There is an assumption in many parts of the world that the

"crisis of capitalism" represented by the freezing up of

the financial system will accelerate the long-term

geopolitical shift, heralding the decline of US power and

European influence. Last year's choice of the G20 as the

forum to tackle the crisis was a belated recognition that

China, India and Brazil, at the very least, must be at the

table. But will the G20 provide lasting leadership? It

smacks of an emergency solution, not a considered

construction. For a start, it has no permanent secretariat.

Gordon Brown, UK prime minister, as current chairman

struggled for months with a tiny team of British civil

servants to forge a consensus. There were divisions between

the US and Europe. More important, there were different

priorities for the industrialised countries and emerging

economies. It was remarkable they managed to agree on a


"It is an arrangement that works for finance ministers and

central bank governors to meet once a year," says Trevor

Manuel, the South African finance minister. "When you take

it up to heads of state and government, the imbalances are


But at least there were few signs of schadenfreude in

London. Expectations in 2007 and 2008 of a "decoupling"

between the crisis-hit economies of the west and the less

exposed emerging markets have vanished. The pain is global

and the solution had to be, too.

The real economic effect of the financial crisis has hit

emerging markets harder than the developed economies, with

a collapse in trade flows and a dramatic fall in commodity

prices. It is clear that those worst hit will be the

poorest - especially in Africa - who have the least to fall

back on.

Second hardest hit are those commodity producers that have

always faced big social and demographic challenges, such as

energy-rich Russia, Iran, Nigeria and Venezuela. Even Gulf

oil producers have been affected. All had become used to

swollen export and tax revenues and face readjustment.

Finally, emerging economies still in transition from

poverty to prosperity - or from communism to democracy -

have been caught by the economic crunch before they could

build stable systems of governance and root out endemic

corruption. They include many in central and eastern Europe

that emerged from the Soviet empire.

Some observers are sceptical about the geopolitical fallout

from any financial crisis. "Geopolitical events like the

disappearance of Mao in China, or the fall of the Berlin

Wall, have far greater consequences than financial shocks,"

says Robert Cooper, director-general of external affairs at

the Council of the European Union. "Look at the technology

bubble in the 1990s. There were no obvious consequences. Or

the 1970s crisis with oil prices. Any geopolitical

consequences rapidly disappeared."

Yet he admits that two financial crises of the 20th century

- the Depression of the 1930s and economic collapse in

Europe after the second world war - did have important

results. The former led to the rise of Nazi Germany, the

isolationism of America and the outbreak of war. The

latter, far more positive, resulted in the Marshall Plan

that financed the German Wirtschafts-wunder and economic

revival across the rest of the continent, which led to the

eventual establishment of the EU. The lessons of the 1930s

also led to the setting up of the Bretton Woods

institutions - the World Bank and International Monetary

Fund - to bring monetary order to the main industrialised

states and a system of crisis management that has survived

for more than 60 years. But today their legitimacy and

representativeness are being called into question.

The central nation in the ongoing geopolitical

transformation is China. It is also the most difficult to

read. "They want everything and nothing," says a senior IMF

official. "What they really want is just to be among the

big players. The coming 20 to 30 years will be the era of

the US and China. They are preparing for this game."

Beijing wants a bigger share of votes at the IMF, to

reflect its rapidly growing economy. But before the G20, it

did not want to contribute from its massive foreign

reserves to increasing the Fund's resources because China

is still, per capita, a poor country. In the end, Mr Brown

announced that Beijing would contribute $40bn, alongside

$100bn each from the EU and Japan, as part of a $500bn

total. "The crisis emphasises that China is a pivotal world

player," says Bobo Lo of the Centre for European Reform in

London. "It might not be a global superpower yet, but it

has accelerated that trend."

If China is a cautious winner, Russia is the most obvious

loser from the upheaval. The choice of the G20 as the

crisis forum rather than the G8 has abolished Russia's

privileged position as the only outsider at the same table

as the wealthiest countries. At the G20 it is one of many

middle-sized economies, such as South Korea and Turkey.

But Russia's weakness is more fundamental. The oil price

may rise and fall but the crisis has exposed its failure to

diversify beyond the energy sector. Its financial

institutions are inefficient, its judicial system corrupt.

In the longer term, it faces a chronic demographic crisis

likely to result in severe labour shortages in the next two

decades. What of the rest of Europe in the new world order?

Like Russia, the continent has an ageing, shrinking

population. Slow growth is inevitable, although most west

European economies have the reserves and the social safety

net to cope with the recession. That is not true of eastern


For the EU, the risk is that solidarity within the Union

will crack, as sneaking protectionism undermines the single

market and the old member states show reluctance to bail

out the new ones that face acute social crises, with a

freeze on bank credit and investment.

The outcome of the G20 - reinforcement of the international

financial institutions and a big emphasis on regulation -

is what Europe wanted. But it may be a mixed blessing. On

the one hand, Europeans have a strong voice in the

institutions, especially the IMF. But they will have to

give up some of that influence in exchange for China's

contribution and the representation of other developing


As for the G20 itself, the chemistry of the group is

unstable. But what seems clear is that without a firm line

from Barack Obama's new US administration, the outcome

would have been more feeble. It was Washington that wanted

to triple IMF resources. The EU was happy just to double

them. Mr Obama played the role of mediator.

France's Nicolas Sarkozy was the only one who insisted last

week that the crisis spelt the demise of "Anglo-Saxon

capitalism". Yet experience suggests that of all the

countries affected, the US has the greatest resilience and

capacity to recover quickly. The EU and Japan seem stuck in

sluggish growth and declining demographics. As for China,

the requirement to adapt from export-led growth to a

radical expansion of domestic demand could be a huge

political challenge. The Communist party will have to

countenance a much faster growth of the middle classes than

it has prepared for. A new world order may be replacing the

old - but it will be a bumpy ride.

Respect quest

When the Group of 20 leaders met last November, there were

great expectations that China, the world's only large

economy still firing on most cylinders, would make a hefty

contribution to the debate.

In the event, China shied away from grabbing a larger role,

saying that its main useful role was to keep its own

economy, worth one-tenth of global output, ticking over at

8 per cent real growth by means of a $570bn fiscal


Last week's G20 was different. Both in the run-up and at

the summit itself, there were clear signs that the economic

crisis has accelerated China's emergence as a big player.

Perhaps the most closely scrutinised bilateral meeting in

London was the first encounter between presidents Hu Jintao

and Barack Obama. China's leader came with a more

co-operative stance than before on boosting the

International Monetary Fund. He also showed Beijing could

not be bounced into positions it did not like when he

objected to an attempt by France's Nicolas Sarkozy to brand

Hong Kong and Macao as tax havens. Ahead of the summit,

too, Beijing was far more active. It let it be known that

the US could not expect China to help fund its enormous

deficit without something in return. It lectured Mr Obama's

new administration on the need to follow stimulus spending

with a renewed effort at fiscal consolidation.

More startling still, a few days before the summit, Zhou

Xiaochuan, governor of China's central bank, suggested that

the IMF enlarge the scope of special drawing rights, its

unit of account, so that SDRs could challenge the dollar as

a global reserve currency.

Ben Simpfendorfer, economist at Royal Bank of Scotland,

says that while that proposal is unrealistic, "it

demonstrates global leadership and underscores the rise of

the east". China, he says, is staking a claim for its

renminbi to become the de facto Asian currency unit, which

would help consolidate its emergence as regional leader.

Shi Yinhong, a politics professor at Beijing's Renmin

university, says China knows that for now it has little

choice but to keep bankrolling the US. But in return for

buying a currency it suspects will one day collapse, it

will seek more respect for its views on issues including

arms sales to Taiwan, Tibetan independence and its

activities in countries such as Sudan.

Indeed, there are already signs that Beijing's strengthened

financial leverage is paying political dividends. When

Hillary Clinton, US secretary of state, visited China in

February, she said human rights "cannot interfere" with

bigger economic and diplomatic priorities. That Mrs

Clinton, of all people, should adopt such a restrained tone

shows just how far things have tipped in Beijing's favour.


Thursday, 2 April 2009


G20: Will China make this the G1?

Alone among the big economies, China is still in the
ascendancy. It may well hold the swing vote at the G20

Dan Roberts
Thursday, 2 April 2009
The Guardian

It is possible to overstate the importance of seating
plans, but it is no accident that Hu Jintao was placed to
the right of Gordon Brown at last night's Downing Street
dinner: China may well hold the swing vote in today's
negotiations at the G20.

Almost alone among the big economies, China is still
emphatically in the ascendancy. It might have all the same
anxieties about the collapse of world trade as the others,
but it can rightly claim the economic high ground in a way
that France and Germany can only dream of.

More importantly, it holds the key to many of the competing
aspirations of other leaders. President Sarkozy has already
identified the Middle Kingdom as the biggest obstacle to a
crackdown on tax havens and international financial
regulation – fearing Hu is overly protective of the
offshore financial role played by Hong Kong and Macau. If
President Obama is to push ahead with fiscal stimulus he
needs to keep persuading China to lend it money by buying
US Treasury bills. And if Gordon Brown is to achieve his
stated goal of rebalancing world trade, he needs to
encourage China to become a nation of importers as well as
a nation of exporters.

All this comes as China finally shakes off its timidity on
the world stage. Since the Olympics, Beijing has shown new
confidence in international affairs – even talking about
replacing the US dollar with a new global reserve currency.
Yesterday's bilateral meeting between President Obama and
President Hu was privately dubbed the G2 – in recognition
of its primacy over the G20. Today it may feel like the G1.