When even the compass could not provide any help, the world used to look at China as the last hope. Right now, the global economy is within a sea of uncertainty, and so is Beijing! China – once considered a safe bet to predict the future – now shows multifaceted approach that’s inclusive of opinions from various segments of the society.
Notwithstanding, one thing is sure: the new government in Italy, headed by professor Mario Monti, would be greatly welcomed in Beijing and certainly is an improvement over the previous government. The Berlusconi government was hardly accepted in China; while there was no official diplomatic row, the low profile in joint initiatives and lack of any friendships made it a non- consequential. History will remember jokes and even derogatory words from the former Italian premier, while the Chinese sought seriousness, pragmatism, reciprocal advantages – a statesmanlike conduct!
The designated Prime Minister looks competent and consequently will be beneficial to Beijing. He represents the interest of not only Italy but also the Euro and Europe. These priorities coincide with China’s interests. China needs a strong European currency to keep the volume of export to the old continent high. At the same time, Euro represents an alternative and a counter balance to the US$. A viable European currency could erode the strong US$ position on the international markets to China’s advantage.
Thus, it is very likely that Beijing will buy the European and Italian debts. The real question is not “If”, but “how much”. Beijing will finance Rome, through purchasing its bonds, but certianly less than what Berlin does. Buying more than Germany may be politically divisive and economically risky. The help will be calibrated and negotiated with a complex strategy. The final answer will depend mainly on the debate recently sprung off in China. This is the real event to scrutinize in the country. The questions that are being asked include how the huge foreign reserves can be useful to China? Is it wise to keep on financing other countries, whose history has been stranger or hostile to China? Many wonder why a different address for its resources is not taken into consideration. The dispute is not confined to millions of netizens, active with microblogs, but also in Zhongnanahai where different opinions are being confronted.
Politicians, bankers, investors, entrepreneurs aim to use country’s savings differently. A new, less rigid, welfare system can be implemented; private consumption can be promoted; one-child policy can be reconsidered etc etc. The Government secretly checks the Chinese’ mood and expectations. It might discover that new heights in holding foreign currency reserves are neither advisable nor requested, especially when alternative uses are possible and desirable. At the least the compensation to buy foreign government bonds, for example from Italy, should be set. Currently, a mixture of high interest rates and trust is the only possible magnet. Is it adequate enough? The unique solution to overcome the skepticism still lingers in Beijing. Consequently, reliability, effectiveness, and vision are both necessary in Italy and will be well received in China.