In Mao’s China, power flowed from the barrel of a gun: Beijing used war more often than anything else to advance geopolitical ends. But China doesn’t need a gun as often today. Over the weekend, when Premier Wen Jiabao promised to use his foreign exchange reserves to shore up Greece’s flailing economy, the world was reminded that geopolitical power now flows from Beijing’s cash.
With investors again sceptical about Europe’s public finances, China is conspicuously riding to the rescue. On Saturday, Wen offered to buy more Greek government bonds; on Sunday, he talked up the euro, a currency that’s been recently criticized.
China deserves points here for a forward-looking strategy. First, it gets to shop around for new investments and new partners, especially now that its old ones—the US—are prompting some rethinking. Second, it has now effectively set up a beachhead at the peripheries of the euro zone, from where it can make inroads into Europe.
And this continent is an important target. Wen himself has expressed hope that the European Union will from now on look favourably at Chinese trade. This surely means relaxing restrictions on Chinese imports into this vast market. It could even mean not attacking an undervalued yuan: The Financial Times has reported that China has been in secret currency talks with France. Europe is, after all, still a useful card in global forums: If the US isn’t going to support China at the Group of Twenty or the International Monetary Fund—Washington is intent on blaming Beijing’s trade policies these days—perhaps Europe can be enticed to do so.
This kind of diplomacy has already earned China African support. Worries about neocolonialism were shoved aside in August when South Africa’s trade minister emphatically embraced China’s investments. It takes no stretch of imagination to assume that this could be Greece’s trade minister in some years’ time: Wen announced $5 billion for Greece’s shipping industry, so that it can buy Chinese material.
By cleverly deploying its savings surplus, China’s Communist Party has in a mere decade managed to amass serious geopolitical clout, and it’s hardly even fired a bullet. Still, when the balance of power shifts so strongly—no matter how it does—the rest of the world has to sit up and take note. It will be in India’s interests to lead the comity of nations in crafting a strategy in response.
What does China want from Europe? Tell us at firstname.lastname@example.org