Zhou Xiaochuan’s recent article caused widespread concern, the cause of which is deep worry about the Fed’s recent announcement that it would heavily purchase U.S. bonds while the connotation is China’s appeal for reform in the irrational global economic system.
Before the G20 summit that will be held on April 2nd, Zhou Xiaochuan, the president of the People’s Bank of China, wrote an article calling for a new international reserve currency to take place of the dollar. It was unexpected that Zhou’s short article, which was published on the bank’s Web site, would have stirred up quick reactions from senior U.S. officials and attracted global attention, especially in Europe and Japan.
As the foreign media and Chinese financial analysts have commented, the argument for the dollar’s termination was not suggested only by China (Russia, Iran and Venezuela had said so before), nor brought up until today (some scholars had proposed similar suggestions many years ago). More importantly, this advice is unrealistic to China’s current interests, but might even take China to face a short-term challenge.
Even so, Zhou, a senior financial official honored as “Mr. RMB” in China, still published his opinions in both Chinese and English, a reflection that big countries are struggling intensely for verbal dominance at the G20 Summit.
In connection with Chinese Premier Wen Jiabao’s worry about China’s dollar reserves during the NPC and CPPCC conferences, Zhou’s opinions are in fact conveying his deep concern that international society, including the U.S., with a dollar-centered international finance system, is in urgent need of reform.
The root of this concern is the deep worry about Fed’s recent views that it would heavily purchase the U.S. bonds, and the connotation of it is China’s long-term and all-the-time appeal to change the old international economic system of irrationality and build a newer, fairer and more democratic one where developed, emerging and underdeveloped countries are more equal in their obligations and responsibilities.
To demonstrate the superiority of the dollar and furthermore, the strong confidence of the American economy in the future, it is not unusual that Timothy Geithner, the Secretary of the Treasury Ben Bernanke, the chairman of the Fed and President Obama would respond in person to China’s worries and uneasiness as it is the U.S.’s biggest creditor. However, the U.S. is not without action on public opinion when contending for message dissemination; the “New York Times,” the “Washington Post” and the big television networks are providing warm-up stories for the upcoming G20 Summit.
On March 25, Mirek Topolanek, prime minister of the Czech Republic, the country now holding the rotating presidency of the EU, pointed out bluntly in European Parliament that the present stimulus plan of the U.S. is undoubtedly a “road to hell.” Although some EU officials criticized his words as “out of bounds,” it profoundly shows the deep divide between the U.S. and Europe on related issues. What Europe wants is to strengthen regulations of international finance, but not to follow the U.S. in stimulating their economies fiscally. During the European Parliamentary session, most European countries focused on financial regulation rather than following America’s stimulus plan.
Unquestionably, Europe’s voice will be supported from some emerging countries like Russia, India and Brazil, and whose appeals are more detailed, including more investment to the IMF from developed countries, more voting rights for those emerging countries and more assistance to developing countries from multilateral financial institutions.
Perhaps only global cooperation and fighting protectionism are two topics that will not cause dispute. But everyone knows that working together is just a moral call and no one can tell whether all countries’ policies will be as warm as the handshakes between the countries’ leaders at the Summit, and “protectionism” is a typical slogan like “odorous Tofu,” which is odorous but delicious. Actually, the U.S. has feigned action in one place and made the real move in another.
The G20 London Summit has not started yet, but the struggle for discourse power has been set in place earlier. It is unknown whether the Summit will be an “exercise in futility” as predicted by the "Financial Times."