[Marxism] Interview with China's Wen

[David Walsh <davidrail68@xxxxxxxxx>]

from 'The Financial Times'

Wen Jiabao: does not see it as Chinaâs role to save capitalism from itself
Wen Jiabao is on the fifth leg of what he calls his âJourney of Confidenceâ 
in Europe and he has been up since before dawn jogging in Londonâs Hyde Park. 
But the 67-year-old Chinese premier looks sprightly and dapper as he raises his 
index finger, looks his interviewers in the eye and says: âI am ready to be 
open and sincere.â

His European trip might come as a welcome relief from political pressures at 
home. Mr Wen is under fire because of the slump in the Chinese economy â 
which, he acknowledges, slowed sharply in the period after the August Olympics 
in Beijing.

But in London he is the man of the moment. Tony Blair, former UK prime 
minister, and David Cameron, leader of the opposition Conservative party, are 
both waiting in the wings at the Mandarin Oriental hotel for an audience, while 
at Davos, Switzerland, last week the delegates hung on his every word.

In a rare interview, Mr Wen outlined in forceful terms Beijingâs approach to 
dealing with the global financial crisis â frenetic activity at home, 
cautious engagement abroad. International expectations of China are intense â 
almost on the same scale as those facing US president Barack Obama. But Mr Wen 
does not see Chinaâs role as saving capitalism from itself.


Hopes in London and elsewhere that China would hand over a large chunk of its 
near $2,000bn (â1,560bn, Â1,380bn) foreign reserves to help recapitalise the 
International Monetary Fund are likely to be disappointed. Mr Wen also plays 
down the idea of signing up to a new environmental treaty at the talks in 
Copenhagen later this year that would place limits on the countryâs carbon 
emissions.

Asked if China bore any responsibility for causing the financial crisis, as a 
number of economists believe, he stiffens and says in a low voice: âIt is a 
ridiculous view.â

EDITORâS CHOICE
Video: âThe mandarinsâ mandarinâ - FT editor, Lionel Barber, profiles Wen 
Jiabao - Feb-02

China to go on European spending spree - Feb-02

Lex: Asian lenders - Feb-02

Downturn causes 20m job losses in China - Feb-02

Wen looks at fresh Chinese stimulus - Feb-01

Full transcript: Wen Jiabao - Feb-02

For the full transcript of this interview, click here

But he makes it clear that Beijing will do whatever is needed to maintain 
growth at âabout 8 per centâ this year. âRunning our own affairs well is 
our biggest contribution to mankind,â he says. If necessary, some of the 
countryâs huge stash of foreign currency reserves could be put towards this 
endeavour â a new plan to enable the use of reserves for domestic purposes is 
under discussion, he says.

Even before the crisis, 2009 was going to be another big year for China. It is 
laden with important and potentially controversial anniversaries, from the 60th 
anniversary of the foundation of the Peopleâs Republic of China to the 20th 
anniversary of the Tiananmen Square protests. The economy is slowing sharply 
â the 6.8 per cent growth in the fourth quarter of last year represented the 
countryâs poorest economic performance in a decade. Chinese exports have 
started to shrink and tens of thousands of manufacturers have gone bankrupt, 
sending 12m redundant migrant factory workers tramping home to their villages. 
Mr Wen, who was the visible face of the government during the earthquake last 
year and has intimate knowledge of rural China, is facing his sternest test 
since taking the helm as premier in 2003.

âWe must take forceful steps. Under special circumstances, necessary and 
extraordinary measures are required,â he says. âWe should not be restricted 
by conventions. Success or failure depends on the pace and intensity of those 
measures.â

Stimulating growth before the current slowdown deepens into a prolonged slump 
is the top priority. Referring to a raft of initiatives that the government has 
already announced, including a Rmb4,000bn ($585bn, â460bn, Â400bn) fiscal 
spending package aimed mainly at infrastructure spending, Mr Wen says that 
further efforts may be required.

The government intends to fight on several fronts. Most important is the 
infrastructure spending and this, he says, is already well under way. But also 
key is a long list of measures aimed at providing the softer context to a 
comprehensive stimulus effort â including initiatives to boost consumer 
spending and welfare.

The sales tax on vehicles with small engines has been halved. Meanwhile, 74m 
low-income people have received lump-sum spending subsidies. Former employees 
of state-owned enterprises received pension supplements, there have been 
subsistence allowances for vulnerable groups, and Beijing has significantly 
increased the salaries of 12m primary and middle school teachers in the state 
system.



The trick in spurring consumer spending is not to engage in sloganising, Mr Wen 
says, but actually to put money into peopleâs pockets. âWe do believe that 
consumer spending is vital in boosting economic development.â

Several commentators in the west have called upon China to overhaul its 
economic model by rebalancing away from its current heavy reliance on 
investment, savings and exports and embrace a more consumer-oriented system 
instead. Most observers agree that such a shift would require Beijing to 
relieve pressure on consumers by beefing up social welfare, healthcare and 
education provisions.

Mr Wen reiterates his pledge to put in place a âfairly comprehensive social 
safety netâ. He adds that Beijing has already announced an Rmb850bn medical 
care spending plan and would spend Rmb600bn on unspecified technological 
upgrading.

The rural economy, which offers a livelihood to more than 700m Chinese, is also 
in for a boost, says Mr Wen, with the recapitalisation of the Agricultural Bank 
of China, the last of the big five state-owned banks to receive a large 
injection of state funds. The ABC is receiving an injection of $30bn, he says.

If Mr Wen expresses confidence in the governmentâs ability to weather the 
challenge to the domestic economy, he strikes a more defensive note about some 
of the international questions raised by the crisis.

Shortly before he left office, Hank Paulson, former US Treasury secretary, said 
in an interview with the Financial Times that the huge volume of savings in 
countries such as China had been one of the root causes of the crisis because 
it reduced risk premiums around the world.

Mr Wen is having none of it. âI think the main reason for this global 
financial crisis is the imbalances of some of the economies themselves. For a 
long time they have had double [fiscal and current account] deficits and kept 
up high consumption based on massive borrowing.â Banks used excessive 
leverage to reap huge profits. âAnd when such a bubble bursts, the whole 
world has been exposed to a big disaster,â he says.

Path to power: a mandarinâs mandarin

When Wen Jiabao took over as Chinese premier in 2003, one of the few things 
that people outside of China knew about the former geologist was a famous 
photograph taken in Tiananmen Square at the height of the 1989 protests.

As a high-ranking official in the Communist party apparatus, Mr Wen worked 
closely with the reformist general-secretary Zhao Ziyang, and he was with Mr 
Zhao on the evening he went to the square for a tearful talk with some of the 
students.

When Mr Zhao and most of his reformist allies were purged, Mr Wen managed to 
keep his job. The skills that saved his career were a keen attention to detail 
and a reputation for unswerving loyalty to his superiors. He was the 
mandarinâs mandarin.

Since becoming premier, he has shown a different side that has won him 
considerable popular support. In a political system where the top leaders wear 
the same suits and dye their hair the same colour, Mr Wen â the son of rural 
teachers â has demonstrated a populist touch. He spends Chinese New Year in 
poor rural areas and is often photographed visiting hospitals or schools.

Within hours of the May earthquake in Sichuan, Mr Wen was on an plane to the 
disaster zone to direct operations, with television cameras covering his every 
move. âThis is Grandpa Wen here,â he called down to one child trapped in 
the rubble. Authoritarianism for a new media age.

âIt is completely confusing right and wrong when some countries that have 
been overspending then blame those that lend them money for their spending,â 
he argues. Mr Wen points to a famous proverb in China about Zhu Ba Jie, a 
fictitious character in the 16th-century Chinese fable, Journey to the West , 
who always blames others who try to help him. âWhen I shared this view at 
Davos with the world business leaders, they all agreed with me on that,â he 
says.

He gives equally short shrift to the argument put forward by Timothy Geithner, 
the new US Treasury Secretary, that China is âmanipulatingâ its currency. 
âCompletely unfounded,â he says: the renminbi had appreciated 21 per cent 
since China adopted a managed float of its currency in 2005.

Mr Wen refuses to make an explicit commitment not to devalue the Chinese 
currency during the crisis â as the government did after the Asian financial 
crisis in 1997, a pledge that helped engineer the eventual recovery and won 
China a lot of prestige. But he does rule out any big shifts in the value of 
the Chinese currency.

âI want to make it very clear that maintaining the stability of the renminbi 
at a balanced and reasonable level is not only in the interests of China but 
also the interests of the world,â he says. âMany people have not yet come 
to see this point that if we have drastic fluctuation in the exchange rate of 
the renminbi, it would be a big disaster.â

Mr Wen says that Hu Jintao, Chinaâs president, and Mr Obama spoke late last 
week on the telephone, but would not confirm reports in the US that Mr Obama 
had told his Chinese counterpart that the new administration would not take a 
confrontational approach over the currency issue. He expresses a hope for 
âincreased co-operationâ with the US, but says that there are a lot of 
different âvoicesâ in the US debate.

Mr Wen says China, which is the largest foreign holder of US Treasury bonds, 
would continue to be an active participant in the market. âWe believe that it 
is important to stabilise the current Treasury bond market. To do so will be in 
the interest of shoring up market confidence, overcoming the global financial 
crisis and facilitating the early recovery of international markets,â he says.

But he also issues a veiled warning that China might rethink its long-term 
investment strategy for its reserves once the immediate crisis is over, when 
some economists believe the huge borrowing the US is undertaking could lead to 
a slump in the value of the dollar. âWe will take into account Chinaâs own 
needs to maintain the safety and good value of our foreign exchange 
reserves,â he says.

. . .

Chinaâs new prominence is coming with new responsibilities, yet Mr Wen is 
keen not to be pushed into too many expensive commitments. He plays down any 
idea that China will use a large slice of its reserves to recapitalise 
international financial institutions, notably the IMF. Any process of reforming 
the IMF should start not with capital injections but with reorganising its 
voting rights to give developing countries a bigger role. Mr Wen also stresses 
that China is still a relatively poor nation with huge development challenges 
ahead, which will limit its generosity.

He uses the same argument to push back against pressure to sign up for carbon 
emission cuts under the negotiations for the revised Kyoto treaty, which are 
due to be completed at Copenhagen later this year. China will continue to set 
itself targets for improving its energy efficiency, he says. But it would be 
difficult for a developing nation âto undertake quantified quotas to reduce 
our emissionsâ.

The Chinese government is equally nervous that the crisis will spur calls for 
swifter political reform and challenge its monopoly on power. That anxiety has 
been evident in the arrest and harassment of some of the backers of Charter 08, 
a manifesto that calls for direct elections, the rule of law and an end to the 
one-party state.

Mr Wen is accustomed to fending off questions about the pace of political 
reform in China, with broad-brush statements about eventual liberalisation. 
âMany people in the west think that China is afraid of elections and 
democracy. Only if you have the trust of your people will they be willing to 
keep you in power,â he says. But he provides little detail about any time 
table for expanding direct elections beyond villages and the few townships 
where experiments have been held.

An eclectic reader, Mr Wen says that when he travels he always carries a copy 
of The Theory of Moral Sentiments by Adam Smith, the Scottish economist, which 
lays out the moral underpinnings for governing societies â and market 
economies.

âAdam Smith wrote that in a society if all the wealth is concentrated and 
owned by only a small number of people, it will not be stable,â he says. It 
is an observation that holds just as well for the crisis-ridden US as it does 
for China, with its skewed model of development and rising inequality.

Copyright The Financial Times Limited 2009


      

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