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Finding a solution is always harder than simply laying blame, certainly this
is true when it comes to fixing the global financial system.
Two years after the system short-circuited, the time for real action to shore
up the fragile global recovery has come.
As the global economy regains its strength optimism is slowly returning,
though let us not forget the lessons learned and that further action is
needed.
Although minor disputes remain, the consensus is -- as leaders at the G20
summit during the weekend have agreed -- healthy and sustainable global growth
is good for all countries.
Moving forward, developed countries need to take responsibility: improving
financial supervision and regulation, cutting fiscal deficits and changing their
growth pattern so to save more and consume less.
Developing countries too have a critical part to play, they must rebalance
their economies by increasing domestic consumption and wean off their reliance
on exports.
Countries need to focus on these goals, and not get sidetracked by domestic
politicking that impedes global progress.
With high unemployment and soaring fiscal deficits in some developed
countries, finding fault with a fast-growing economy seems an all too easy trick
to swing public opinion against an "evil other" rather than finding a
constructive solution to benefit the world at large.
China, the world's third largest economy, continued to grow at a rapid rate
throughout the downturn when developed countries sank into depression.
Consequently it emerged from the global depression comparatively stronger than
before.
The result should be cause for praise not criticism. Yet, some western
politicians and commentators have used it against China.
A range of Chinese policies, such as those in the fields of
foreign trade, exchange rate and indigenous innovation encouragement, have been
criticized.
Take the yuan issue as an example: the United States along with some other
western countries allege China has artificially kept the yuan undervalued to
benefit its exporters, which has hurt employment in their countries and caused a
global imbalance.
However, the statistics tell a different story. The yuan appreciated by 21
percent against the greenback from 2005 to 2008, but China's trade surplus with
the U.S. increased by 20.8 percent annually. In 2009, the yuan exchange rate
remained stable, but China-U.S. trade surplus declined 16.1 percent.
Although China has repeatedly stated its currency policy is not the cause of
the global financial crisis or, if altered, a cure for global economic
imbalances, pressure for a stronger yuan has never ceased.
On June 19, China's central bank announced to further reform the formation
mechanism of the yuan exchange rate to improve its flexibility. The move
indicated an end to the crisis-mode policy the government took in the past two
years to ensure the economy remained stable.
Despite the recent change in China's currency policy, there is a high
possibility that the yuan issue will continue to simmer.
Facing mid-term elections in November, some American politicians will no
doubt use the issue to gain votes. Also there's growing pressure within the
United States to use trade sanctions against China.
Yet, people should not be fooled by slick political spin and forget that the
systemic failure of the global economy was caused by the sub-prime mortgage
crisis in the U.S.
Over the past two years governments have battled to hold their economies
together, injecting trillions of dollars into the market. Global growth has
tentatively returned as a result.
The battle is far from over. The possibility of a double-dip is very real as
the European sovereign debt crisis has sadly not been contained.
Greece, Portugal, Spain, Ireland and a number of other European countries are
grappling with soaring national debts. If a wave of national defaults sweep the
globe, where would that leave us?
At the G20 summit, leaders pledged to continue with stimulus measures to help
secure strong, sustained and balanced growth. Advanced economies also committed
to fiscal plans to at least halve deficits by 2013 and stabilize or reduce
government debt-to-GDP ratios by 2016.
This is a move in the right direction, but the next step, the most important
one, is to make the commitments real by putting them into
action. |
