China monthly review: Seeking to consolidate its international presence

Two topics dominated Chinese affairs in November. First, the financial crisis and its aftermath, which forced the government to take important steps, and secondly, the persistent problems that have led Beijing to maintain a somewhat strained relationship with the world as it strives to assert its principles.

Accordingly, the government decided to take a step forward to consolidate itself internationally, and disclosed a document which delineated its policies and strategies for building relationships in Latin America and the Caribbean.

Deploying international strategies

November began with several milestones in China’s foreign policy. Chen Yunlin, president of the Association for Relations across the Taiwan Straits (ARATS), visited Taiwan, becoming the Chinese Government's most senior official to do so.

The visit represents progress in Beijing-Taipei ties, because the two signed an agreement to triple the number of passenger flights, which now includes daily, direct flights. They also agreed to cargo flights, mechanisms for regulating food safety and direct postal service. The only setback during the visit was the number of demonstrations that opposed Taiwan rapprochement with the People's Republic.

Despite demonstrations, the Chinese government asked newly elected president of the United States, Barack Obama, to oppose Taiwanese independence the day after Chen Yulin left.

In other news, China strengthened ties to Latin America. Beijing published a report entitled "China's Policy toward Latin America and the Caribbean". The document included a history of its ties to the region and the future of relations, which expresses a clear intention to deepen ties with this part of the globe.

President Hu Jintao embarked on a mid-month tour of Latin America and the Caribbean, seeking to reinforce the strategy expressed in the document. The tour began in Costa Rica, a country with which it will soon begin negotiations for a Free Trade Agreement (FTA). Hu Jintao then traveled to Cuba, where he met with Fidel and Raul Castro. As part of the usual treatment toward its allies, China was more than generous with the Caribbean country, providing loans, donations and humanitarian aid for hurricane victims. It also extended the deadline for payment of various debts incurred by Cuba in the early nineties.

Hu Jintao’s last stop in his regional tour was Lima. He arrived early enough to become the first leader to arrive for the APEC 2008 summit. The visit also included a China-Peru FTA and the possible sale of a Chinese satellite.

The inevitable conflicts

The ever-present problems at the international level also made news. US officials issued a nationwide alert on Chinese food imports, as a result of the contaminated milk scandal. As such, the Chinese government agreed to open FDA offices in three of its cities, in order to assist in the control of food products.

The conflict in Tibet also returned to the agenda. The third meeting of a commission composed of Tibetan and Chinese representatives. The group originated as a result of the riots that occurred during March 2008. After the meeting, the Tibetan side expressed its concern at the reluctance of China to resolve important issues.

In related news, Beijing enthusiastically received the United Kingdom’s official recognition of Chinese sovereignty in Tibet. At the same time, it condemned the decision of French President Sarkozy to meet with the Dalai Lama in December. As such, the Chinese government postponed an EU-China meeting scheduled for Dec 1, and which was supposed to take place in France.

Responding to the crisis

China has not remained indifferent to the crisis. As all the world's governments announced measures to tackle the financial crisis, the State Council of China also announced a package of measures. The plan will be gradual, over the next two years, and will mainly include more public spending on infrastructure projects.

A total of $570 billion will be invested to boost local business activity and revive domestic demand. The announcement generated an immediate reaction in every country on the globe. The day after the announcement shares opened higher in Japan, China, Hong Kong and even Chile. Meanwhile, the Shanghai Composite index rose by 5%.

In terms of macroeconomic performance, the trade surplus in for October reached its highest point in three months, or 20% higher than September, per authorities on Nov 11. Despite the increase, there are signs that foreign demand for Chinese goods is starting to decline. Exports only rose by 19.1% in October, as compared to the same month last year. This also represents a drop, especially when compared September’s 21.5% growth in exports. Imports rose by a mere 12.4%, as compared to September’s 21.3%. This is due to stagnant domestic demand.

The employment outlook is also less than optimal. An estimated several million have lost their jobs this year in China. In Shandong province alone, 700,0000 have been laid off this year. In the manufacturing hub Guangdong, it is estimated that every day 130,000 migrants return to their homes, due to the closure of thousands of companies. As such, Chinese officials decided that companies in the provinces of Shandong and Hubei seeking to lay off more than 40 people must obtain prior approval.

In another measure announced by the Central Bank of China on November 27, the nation slashed its interest rates for the fourth time since mid-September. The rates dropped to 5.58%, after having been fixed at 6.66%.

Social problems

Heavy flooding continued throughout November. This time the southeast of the country was hit with ostensibly the worst rains since 1907. After more than ten days of heavy rains, the provinces of Yunan and Guangxi were severely affected by the floods, which destroyed crops, blocked roads and damaged water reservoirs and dams. There was estimated $100 million in damages, together with the evacuation of about 60,000.

In other news, the United Nations Development Program issued a UNDP report, entitled "Basic Public Services for 1.3 billion people," in which it stated that the lives of Chinese have improved tremendously over the past three decades. This is due to a decrease in poverty, a rise in adult literacy, and the fact that Chinese now have a longer life span.

However, despite rapid economic progress, new problems have emerged, such as the immense divide between rich and poor. The report also found that people must register in a given zone in order to be eligible to receive government benefits. Due to massive rural-urban migration, hundreds of millions are now out of the system.