Financial Crisis: A Chinese Intervention

Author: Crystal Fontaine

With the prices of gasoline at the pumps, one would almost assume that many people would be excited. One would think that the way people drive would revert back to the familiar ways of yesteryear. Finally, I can afford to fill up my tank again! Well, we are all probably relieved by the prices at the pump; however, people are still playing cautious. Many of us have changed the way we drive and the way we live our lives in order to save a few bucks here and there. I know I have and I probably won’t be changing my cautious ways anytime soon. With the very close upcoming presidential election, the weight of the current financial crisis is currently on every voters mind.

Throughout the campaigning, especially within the recent months, it has become a major concern and focal point. Both John McCain and Barack Obama backed President Bush’s $700 billion rescue package for the financial industry. Both believe in more tax relief for the middle and working classes; however, McCain and Obama differ in the taxation of high income earners. Obama would like to revoke the tax cuts that Bush made for those higher incomes, while McCain believes that is not necessary. Either way, the financial problems are definitely not going away any time soon.

America is not alone. The financial crisis has clearly become a global concern, with its impacts leaving no corner of the world untouched. Over the previous weekend of October 25, there was the annual Asia-Europe meeting, or ASEM. The ASEM is an informal process of dialogue and cooperation that brings together the member nations of the European Union and the EU Commission as well as sixteen Asian nations and the ASEAN Secretariat. The ASEM allows for these nations to debate informally over a variety of issues. At the ASEM, Premier Wen Jiabo of China called for new rules to guide the international financial system, following a call by Asian and European leaders for the International Monetary Fund to intervene and deal with the ongoing global financial situation.

According to Premier Wen Jiabo, “[w]e need to draw lessons from the crisis…We need financial innovation to serve the economy better. However, we need even more financial regulation to ensure financial safety”. No one denies that something should be done to help fix the world’s struggling economy. Current French President Sarkozy said that the ASEM summit was “helpful” for the promotion of efforts to tackle the problem. China appears ready on all counts to step up to the plate and take a lead role in fixing the credit crisis. If China does indeed decide to intervene it will be interesting to see if they honor their word or not, granted if other nations allow the proposal at hand. China has been a huge exporter of cheap consumer goods to the United States and other nations, beating nearly all other manufacturers around the world. With the economies of these nations on the fritz, China needs to begin turning its spending ambitions internally. An editorial in the New York Times claims that, “ To get China’s consumers to spend, the government will need to spend more at home, investing in public work projects and providing more social benefits—including health insurance and pensions…This is clearly Beijing’s interest, though China’s leaders are still clinging to the old export strategy”.