Has any economist ever calculated the foreign policy multiplier of funds well spent in winning friends and influencing people? If such non-tangibles can ever be quantified, the foreign policy multiplier of the US$1 billion that China spent shorting up the Thai baht can be expected to be a sizeable figure.
The timing was perfect for China. This significant act of economic diplomacy comes barely a month before China hosts the biggest annual meeting of the worlds finance ministers and central bankers, which also attracts the largest gathering of global bankers and financiers, namely the annual meetings of the International Monetary Fund, the World Bank and its affiliates, to be held in Hong Kong. We can look forward to China's finance minister making a big deal of the support offered to the Thai baht at the Fund-Bank meeting. Its Prime Minister has understandably been making a point of it on his visit to Singapore this week.
Addressing a meeting of Singapore businessmen earlier this week, Chinese Prime Minister, Mr Li Peng, reiterated his government's commitment to greater economic and business co-operation with South-east Asia, and has reassured the region that China's supportive hand could be depended upon in the turbulent world of money and finance. We should seriously draw lessons from previous financial crises in the world, keep a high degree of vigilance, strengthen financial regulation, improve the financial system so as to forestall and reduce financial risks to the minimum and ensure a sound growth of the economy, said Mr Li, speaking at a meeting hosted by the Singapore Trade Development Board.
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Mr Li added for good measure: We are soberly aware that compared with the developed countries, the economic strength of countries and regions like ours is still relatively weak and the financial system not adequate, thus bearing financial risks which make it susceptible to the impact of the turbulence of the international financial market.
Surprisingly and regrettably, with the singular exception of The Hindu, no Indian newspaper, including financial newspapers, reported Mr Li's important speech. It is a matter of shame that reportage of news from the rest of Asia, especially China, still comes to us mostly through western news agencies which have their own priorities. Not a single Indian newspaper has a correspondent stationed in China, our most important neighbour, an emerging superpower and a country whose experiments with economic policy deserve better understanding here. Even the despatches from the lone Indian journalist in Beijing, a correspondent of Press Trust of India, are not regularly used by newspapers which devote more space to the sexual escapades of Princess Diana and such like news. At least one newspaper recently considered posting a fulltime correspondents in Beijing, clearly the most challenging job for any Indian journalist today, especially an economic and business journalist, but gave up the idea because it felt it could not afford the cost.
For all the talk of India's Look East policy and our interest in ensuring a mutually beneficial link with Resurgent Asia, the media neglect of events in the region, its reluctance to invest in foreign correspondents here and its wretched dependence on western sources for news and analysis of events is unpardonable. India's patriotic, swadeshi businessmen, who continue to lobby the government for protection from foreign competition, should at least spend some money to ensure better media coverage of developments in China, East and South-East Asia if for no other reason than to learn a lesson or two in how to protect their interests against foreign competition.
In his Singapore address this week, Mr Li reportedly said that some restrictive measures on foreign investors and their production management in China would continue. For instance, the restriction on registration of joint ventures for say 15 or 20 years, as specified in the initial contract would hold good. After that period, these companies would be owned by the Chinese partners.
Similarly, the restriction on access to the domestic market would continue and the joint venture companies could sell only the specified 10 to 20 per cent of their production in the domestic market. The rest should be for export. Says The Hindu report: Mr Li told investors, categorically, not to look at the big markets for products like telephones or colour televisions for example and said no foreign company would ever be able to compete with the local firms producing them.
Mr Lis forthrightness would warm the heart of many an Indian businessman. However, if they expect Indian prime ministers and finance ministers to talk that kind of language and not genuflect before foreign investors, they must also be prepared for the tough life the Chinese have lived in their quest for superpower status.
At a more practical level, if the Chinese mean what they say, (often they dont) then the Indian government must wake up and examine to what extent we can arrive at common positions on an issue like the Multilateral Agreement on Investment (MAI) proposed by the OECD. Mr Li's Singapore speech goes contrary to the provisions of the proposed MAI and does not even meet the requirements of the World Trade Organisation. After all, if China is serious about joining WTO, it will have to comply with the agreement on TRIMs (trade-related aspects of investment measures), which explicitly prohibits linking foreign direct investment to export obligations. Will China fall in line and Mr Li eat his words? Whatever their game plan, we must get to read more about it in the columns of our newspapers.