President Obama's first day in London for the G-20 Summit made for what appears to have been a productive foreign relations binge, of sorts, whereby the president accepted invitations and entered agreements with both Russian President Medvedev and Chinese President Hu. While the outcome of the Medvedev meeting was somewhat unexpected, Obama's meeting with Hu Jintao has long been anticipated, with many calling the summit 'G-2' rather than G-20. From the AP:
Obama accepted an invitation to visit Beijing this year and the two leaders agreed to create a new U.S.-China Strategic Economic Dialogue, said a senior American official who briefed reporters in London.
The official said Obama agreed during the meeting [Wednesday] on the need to change the International Monetary Fund to give China and other developing countries an "an appropriate role" but the two leaders did not discuss details. A bigger voice in managing the world's finances is a key Chinese demand, and Beijing has suggested its contribution to global bailout efforts will be contingent on receiving it.
"The presidents agreed that the strong links between China and the U.S. economies have been a great mutual benefit, both in terms of trade and investment, and they were eager to build on that," said the official, who talked on condition of anonymity in line with U.S. government policy.
However, though the US and Chinese economies are inextricably linked, the Chinese have recently grown more dissatisfied with this long-held arrangement. Last week, China's central bank governor Zhou Xiaochuan published a paper calling for a new global currency to replace the dollar. Moreover, as the Financial Times notes, China is using the momentum from Mr. Zhou's proposal to flex more economic muscles in London this week. From the Financial Times:
Meanwhile, ahead of the summit, China has established Rmb650bn ($95bn, €72bn, £66bn) worth of currency swaps with Indonesia, Belarus, Malaysia, Argentina, Hong Kong and South Korea - all of which indicate a more confident diplomacy and a larger future role in international finance for the Chinese currency.
The more assertive stance also reflects anger building in China about criticism that its large current account surplus and reserves helped create the crisis and the realisation that its huge holdings of US bonds give it little direct leverage over US policy.
"In my 16 years of covering China I have never seen the country approach an international forum in such a proactive way," says Dong Tao, economist at Credit Suisse. "China has traditionally been passive on the international stage, being a listener rather than an opinion leader, but this time it's different. China wants to make sure [its] voice is being heard."
As the AFP reports, Presidents Obama and Hu also addressed the growing specter of protectionism around the world that, though mutually feared, is also becoming increasingly practiced by most of the G-20 states. Despite G-20 nations' pledge at the last conference in November 2008, a World Bank report [PDF] has found that 17 of the 20 nations have collectively imposed 47 varying protectionist measures since that time. The Economist lists some examples:
Indonesia has specified that certain categories of goods, such as clothes, shoes and toys, may be imported through only five ports. Argentina has imposed discretionary licensing requirements on car parts, textiles, televisions, toys, shoes and leather goods; licences for all these used to be granted automatically. Some countries have imposed outright import bans, often justified by a tightening of safety rules or by environmental concerns. For example, China has stopped imports of a wide range of European food and drink, including Irish pork, Italian brandy and Spanish dairy products. The Indian government has banned Chinese toys.
And here is Presidents Obama and Hu's joint statement to the press.