Andrew Polk's blog

Last month China recorded its largest-ever surge in bank loans, the government reported over the weekend. 

While the rest of the world begs for lines of credit and U.S. policymakers struggle to unclog the financial system, Beijing has announced that it will need to "strictly control lending," especially to certain areas of the economy such as "high-polluting, high-energy consuming industries and...those with overcapacity." 

Part of the Chinese government's concern is that money from their stimulus package, announced last November, is getting stuffed into various industries that may eventually produce a spate of overly risky loans. They also worry about the onset of inflation in 2010, if too much money gets dumped into the economy now. Remember the good old days (as far back as summer 2008) when Beijing's biggest economic worries were high inflation and over-heating? Well, even if we don't, the Chinese certainly do. And they plan to avoid revisiting them.

In a related announcement on Saturday, Chinese Prime Minister Wen Jiabao explained that the Chinese economy was performing better than expected, building on recent positive projections from a variety of analysts, including some at the World Bank. A day earlier, U.S. President Barack Obama gave a press conference at which he expressed "glimmers of hope" for the American economy, but comparatively, the evidence for his prognosis seemed much more meager.

And it's safe to say that the Chinese noticed that fact as well. In fact, while reading this China Daily (one of China's state-run newspapers) report, it's hard not to detect a sense of schadenfreude coming out of Beijing when it compares Chinese prospects:

'Despite the year-on-year slowdown, the Chinese economy has posted a strong recovery on a quarterly basis, making us more upbeat about the country's economic prospects,' said Frank Gong, senior economist, JP Morgan, who predicted China's quarter-on-quarter GDP growth has rebounded to about 5 percent in the first quarter from only 1.5 percent three months earlier."

to American prospects:

US President Barack Obama said last Friday that the US economy was beginning to show 'glimmers of hope,' as mortgage interest rates declined to historic lows, while refinancing has shown significant pick-up. But some analysts said the largest economy in the world and also China's major trade partner is far from bottoming out, given the severe stress of financial malaise and job losses."

One hopes that China will use this growth potential not just to expand its regional influence and national interests, but also to continue to take positive steps in global cooperation. After all, they certainly still have great interest in the health of the American economy.             

Photo: Frederic J. Brown/Getty Images

By Gregory Shtraks and Andrew Polk

A day before the meeting of G20 leaders was set to begin in London, U.S.President Barack Obama and Chinese President Hu Jintao met to discuss the increasingly important relations between the two countries. One key result of the meeting was the announcement of a "‘new' U.S.- China Strategic and Economic Dialogue" which will begin in Washington in a few months.

As opposed to the Bush administration's "Strategic Economic Dialogue" started by former Treasury Secretary Paulson, these meetings will have two distinct facets and will be lead by both Secretary of State Hillary Clinton and Treasury Secretary Tim Geithner on the U.S. side. With two well-known American leaders heading up the effort, here's a look at their Chinese counterparts:

Dai Bingguo makes almost a perfect synthesis of the two: He is a high-profile heavy-hitter like Clinton and seasoned bureaucrat like Geithner.  Dai's career in the Ministry of Foreign Affairs stretches back to 1974, with brief interruptions in posts as an ambassador and as Head of the International Department for the Central Committee of the Communist Party of China. 

Just as Hillary Clinton is the chief representative of the Obama administration's attempt to remake the U.S. reputation, Dai is often considered the international face of China's growing clout and increasingly pervasive charm offensive. In 2003, Evan Medeiros, writing in Foreign Affairs noted Dai as a leader in the country's growing sophistication in diplomatic affairs, as he deftly handled China's North Korea stance. He has also matched Clinton's hectic traveling schedule of late, making stops throughout Southeast Asia and Latin America. According to this Financial Times article from February, he seems to be a pretty smooth operator:

 
It takes quite a lot to throw Hillary Clinton off her stride, but Dai Bingguo, China's senior foreign policy official, just about managed. "You look younger and more beautiful than on TV," he told the US secretary of state, who seemed to momentarily blush.
 

Tim Geithner' understanding of Asia might pay prove useful in the discussion. Geithner completed high school in Bangkok (where his father Peter was director of Ford Foundation's Asia division) and then focused on Asian economics for both his undergraduate and graduate degrees. He is even said to speak decent Chinese and Japanese.

Geithner's counterpart in the Economic Dialogue, Vice-Premier Wang Qishan, also had some family help early in his career. During the Cultural Revolution Wang was sent to work as an "educated youth" in remote Shaanxi province and would have probably missed his chance at getting an education if not for the influence of his father-in-law, conservative Party leader Yao Yilin, who helped young Wang get accepted into a university. Wang is thus considered to be a "Princeling"- a cadre whose career had been accelerated by a family member who was a high-ranking member of the CCP. 

However, unlike other Princelings, Wang is widely respected by both the Party and the general public. He is known as "Chief of the Fire Brigades" for his role in effectively managing the SARS crisis as Beijing's mayor in 2003. Meanwhile, his reputation for economic prowess and steadfastness was cemented by his role in managing Guangdong's financial scandals in the late 1990's. He also spent a number of years conducting agricultural reforms and over a decade heading China's Construction Bank. The 59-year-old was elevated to the Politburo of the Chinese People's Congress Central Committee (CPCCC) in 2008.

With the Chinese-US relationship widely being seen as crucial to global financial stability, the stakes for the success of the dialogue for all parties involved couldn't be any higher.

No one is betting on the health of Argentina's economy these days. Ever since the country defaulted on its international debt in 2001, confidence that its economic situation could turn around has been extremely low. Indeed, in February, when the Argentine government requested permission to once again enter its bonds into U.S. capital markets, the Wall Street Journal suggested this response:

The SEC should instead insist that Argentine securities bear a warning like cigarette packages: 'This issuer has a record of misrepresentation, debt defaults and debt repudiation, and therefore may be dangerous to your financial health. Do not consume this issuer's bonds unless you have a platoon of lawyers and a Navy to back them up, and you're prepared to use both.'"

Why, then, would China use this week's Inter-American Development Bank meeting in Medillín to agree to a $10.24 billion currency swap with a country whose bonds could be worth next to nothing by the end of 2010? Two reasons seem apparent -- one is straightforward, the other is disturbing.

First, as Xinhua reports, the Argentines can essentially use the RMB as extra cash to pay for imports. But one might note that, since the Yuan is not a convertible currency, the money can only be used to purchase goods from -- you guessed it -- China, potentially giving a boost the Dragon's ailing export sector.

The other reason for the swap seems more strategic, especially in conjunction with other currency trades that China has very quietly signed with Malaysia, Hong Kong, South Korea, Belarus, and Indonesia over the past three months. As the Financial Times puts it:

Economists...see Beijing's currency swap deals as pieces in a jigsaw designed to promote wider international use of the renminbi, starting with making it more acceptable for trade and aiming at establishing it as a reserve currency in Asia, something that would also enhance China's political clout." 

Combine these actions with China's recent call to replace the U.S. dollar as the international reserve unit, and it starts to look like this currency swap has nothing at all to do with Argentina.

RAUL ARBOLEDA/Getty Images

Eastern Europe will have a busy time next week with a handful of elections in the region and several meetings of various sorts in the Czech Republic.  As per usual, economic developments will dominate the headlines in most regions.  

Weekend

The first round of presidential elections will take place in Slovakia.

Pope Benedict XVI will visit Angola.

Not to be outdone by the likes of Paris, Milan, or New York, New Delhi will continue its own fashion week.

Not to be outdone by the likes of Slovakia, Macedonia will hold its own presidential election.

Monday

Japan is expected to announce emergency employment plans in order to prop up its ailing export sector.

Korea will launch a new, more centralized, stock processing system.

The EU and South Korea will begin the final round of negotiations on a new trade pact.

Tuesday

The main suspects in a foiled 2007 plot to attack U.S. and German targets in central Germany will go on trial in Dusseldorf.

Ukraine's President Viktor Yushchenko will meet with Czech President Vaclav Klaus in Prague.

Meanwhile, the Czech government will face a no-confidence vote in the parliament's lower house.

The European Parliament will hold its regular monthly session, and host British Prime Minister Brown, in Strasbourg.

Wednesday

U.S. Secretary of State Hillary Clinton will head to Mexico City. Obama visits next month.

The U.K. Parliament will consider a draft order to dissolve the cabinet and legislature of the Turks and Caicos Islands following a corruption inquiry that found "clear signs of political amorality and immaturity."

Venezuelan teachers will go on strike in order to demand a wage hike.

Brazil will get on the fiscal stimulus train by announcing a new housing stimulus package.

Thursday

Australian Prime Minister Kevin Rudd will go to Washington for his first U.S. visit since President Barack Obama came to power.

The International Atomic Energy Agency Board will hold a special meeting in Vienna to elect a new director general.

The chief U.N. war crimes prosecutor for former Yugoslavia will arrive in Belgrade for a two-day visit to assess efforts to capture remaining fugitives.

In Medellin, Colombia, the annual meeting of the Inter-American Development Bank board of governors will commence. Finance ministers and central bank governors from 46 countries will attend.

Friday

Kyrgyz opposition parties plan to stage mass protests against President Kurmanbek Bakiyev.

EU foreign ministers meet in the Czech Republic through March 28.

Chinese oil firms will issue 30 billion Yuan of bonds in order to finance their operations.  The move underscores China's continued expansion in the oil sector even during the global economic contraction.

New Zealand will release its 4th quarter GDP data.

This week the world seems to be turning toward a little frivolity in order to deal with the psychological depression brought on by the global recession.  Talk shows, dog shows, festivals, and even Facebook will make headlines. One event, however, that will be marked with more than a light heart is the 50th anniversary of the 1959 Tibetan uprising. Protests are planned worldwide and the Chinese government is already preparing.    

Weekend

The National People's Congress continues in Beijing.

U.S. envoy Stephen W. Bosworth will visit South Korea.

U.S. Secretary of State Hillary Rodham Clinton visits Turkey where she will go on one of the country's most popular talk shows.

North Korea will hold parliamentary elections, which analysts say could hold major importance for issues of Kim Jong-Il's succession.

Dog lovers will be watching -- but not via the BBC -- as the Best in Show award is presented on the final day of Crufts, the largest dog show in the world, which takes place in Birmingham, England.

French President Nicolas Sarkozy will head to Mexico.

Monday

South Korea and the United States will begin joint military exercises.

The EU foreign policy chief Javier Solana will head to Prague to prepare an informal summit of EU foreign ministers.

U.N. Secretary-General Ban Ki-moon and former U.S. President Bill Clinton will go to Haiti to promote international aid and stability.

Tuesday

UNDP will launch its report on the "HIV vulnerabilities of Asian women migrants inthe Arab states."

From Beijing, the American Chamber of Commerce in China will release a report on business conditions in China.

Protestors around the world will mark the 50th anniversary of the Tibetan uprising.

A climate science conference will begin in Copenhagen where scientists from around the world hope to set the foundation for a new Copenhagen Protocol.

Uruguay's president Tabare Vasquez will meet Brazil's President Luiz Inacio Lula da Silva in Brasilia.

Wednesday

NASA will launch it's the latest Discovery shuttle.

Deadline for Congress to vote on the newest spending bill arrives.

In a move that is sure to have the international community up in arms, Facebook will change its homepage.

The festival of Holi will be celebrated all over India.

Thursday

The U.S.government will release retail sales data from February.

After a finally having a good week for its government bonds, South Korea may cut it's interest rates.

General elections will occur in Antigua for the United Progressive Party of Prime Minister Baldwin Spencer.

Friday

The deadline arrives for prosecutors to indict Bernie Madoff.

The Dutch government will reveal its latest plan to deal with the recession.

World leaders are becoming ever more internet savvy these days. Obama's team used the web to create a grassroots presidential campaign and his administration continues to send emails and post youtube videos to disseminate information. Even in some of the most unlikely places, presidents and prime ministers are going to the internet to get in touch with the people -- or at least to give that impression -- as even Dmitry Medvedev and Mahmoud Ahmadinejad have setup their own online fora.

The latest example is China, where Premier Wen Jiabao spent two hours online chatting with netizens on Saturday. According to the Wall Street Journal:

Wen started by saying he'd been looking forward to chatting online with the public. 'I am glad to have this online chat with all of you,' he said. 'I always believe that the public has the right to know what the government is thinking and doing, and criticize and suggestions on government policy.' He also said that he was a bit nervous in his first online chat, but said that he would follow his mother's advice to 'always talk honestly and with heart.'"

While the motives for leaders like "Grandpa Wen" surely involve a bit (if not more) of propaganda, it seems encouraging that participants were allowed to ask straightforward questions and air legitimate concerns:

-'Affected by the financial crisis, we farmers find it hard to find jobs. I want to start my own small business... I hope we farmers can also get small-scale loans that we can repay in three or five years.' Wen said the government should encourage them to start their own businesses by offering a tax stimulus and training opportunities.

-'As a consumer, I feel like I am treated like God in the shops. But when can I feel the same way while in hospitals?' Wen replied that the government will do more to make the country's health care system more accessible and affordable.

-'Premier Wen, what do you think about the power of government officials? And what do you think the power you hold?' Wen said the government is making active preparations for officials to declare their assets as part of the effort to combat corruption."

However, the premier did not have time to get to every question:

-Late Premier Zhou Enlai was known of being able to drink a lot, so how much can you drink?"

This chat was undoubtedly an effort to bolster the premier's already soaring reputation. Still, for the average Chinese person, this type of candid interaction with the a government leader would have been largely unimaginable even ten years ago. 

Feng Li/Getty Images

Economic news will continue to dominate the upcoming week in each corner of the globe. Australia will release its fourth quarter figures, U.S. unemployment data will come out, and the EU will hold yet another emergency summit in Brussels. South American leaders will also get involved when finance ministers and central bankers from 19 of the region's countries will meet with their counterparts from Spain and Portugal. Asian ministers will hold their own conference in Thailand, as ASEAN convenes. For the exact timeline, keep reading -- hopefully one of these summits will end with something resembling a solution.  

Weekend

The official celebration of Zimbabwean President Robert Mugabe's 85^thbirthday will be held in the town of Chinhoyi. Newly appointed Prime Minister -- and Mugabe rival -- Morgan Tsvangirai will also attend the celebration.

The 14th summit of ASEAN leaders will continue to be held in Hau Hin, Thailand.

EU leaders will hold an emergency summit to discuss the continuing economic downturn. The meetingwill highlight the division between east and west European nations.

New Zealand Prime Minister John Key will visit Canberra for an annual bilateral meeting with the Australian prime minister.

Monday

Pascal Lamy, the director-general of the World Trade Organization will give an address on international trade and the global financial crisis in Sydney.

The Governator, Arnold Schwarzenneger, will make an appearance with German Chancellor Angela Merkel at the world's largest trade fair, CeBit, in Hannover, Germany. He will also meet with the German foreign minister.

Finance ministers and central bank governors from Spain, Portugal, and 19 South American countries will meet in Port, Portugal to discuss responses to the global financial crisis.

Russian President Dmitry Medvedev begins a two-day visit to Spain.

AIG is set to announce its overhaul plans, which could include a 3-way break up facilitated by the government.

Former Thai Prime Minister Thaksin Shinawatra will make a rare public statement at the Foreign Correspondent's Club in Hong Kong.

Tuesday

The National Archives in London will hold a press event to highlight the latest file releases from the British Security Service.

Preliminary hearings are scheduled to begin in a Moscow court regarding a new embezzlement and theft trial against oil tycoon Mikhail Khodorkovsky.

The Malaysian government will hold an emergency sitting that could force the dissolution of the government.

U.S. President Barack Obama will meet with British Prime Minister Gordon Brown in at the White House.

Wednesday

South Korean President Lee Myung-bak begins a visit to Australia.

Judges at the International Criminal Court in the Netherlands are set to announce whether they will order the arrest of Sudanese President Omaral-Bashir on charges including genocide and crimes against humanity.

Gordon Brown will head across town to address the U.S Congress.

Australia will release its GDP figures for the fourth quarter of 2008, an announcement that could have serious repercussions for the value of the country's currency.

Thursday

The Chinese government's National People's Congress opens its session in Beijing.

The European Central Bank will hold a policy meeting where it is widely expected to cut interest rates by 50 basis points to 1.5 percent.

Yemen's parliament will hold an emergency session to discuss amending the country's constitution in order to extend the parliament's term.

The Inter-American Development Bank will commemorate its 50th birthday by meeting in Managua, Nicaragua, a country which is currently requesting a $300 million dollars loan from the bank to survive the economic crisis.

Friday

U.S. Secretary of State Hillary Clinton will head to Geneva to meet with Russian Foreign Minister Sergey Lavrov, where the two will discuss ways to improve cooperation between the two nations.

The latest and highly anticipated unemployment data for the United States will be released.

The Japanese government plans on passing another major spending bill, which would give $315 billion toward stabilizing the country's ailing stock market.

In his first on-the-record meeting with the media, held Wednesday, CIA Director Leon Panetta discussed the destabilizing effects of the global economic crisis. After he expressed particular concern over potential trouble in Argentina, Ecuador, and Venezuela, the Argentines are not happy. Yesterday President Cristina Fernández de Kirchner summoned the U.S. Ambassador to discuss the CIA director's comments, and speaking at a news conference, Foreign Minister Jorge Taiana had this to say:

We consider the statements an unacceptable interference in the internal affairs of our country, even more so coming from an agency that has a sad history of interference in the internal affairs in the countries in the region."

While economists are predicting that Argentina's GDP will contract next year, none of them seem to be forecasting this sort of doomsday scenario. Ambassador Earl Wayne claims that Panetta's statements do not reflect the U.S. government's official position, but rather the CIA chief was merely recounting the opinion of a "foreign source." Even if that is true, it's hard not to get the feeling that the CIA is once again causing trouble in Latin America.

Paul J. Richards/GETTYIMAGES