Download Spotlight on Fellows: Guo Xuejun

W
orking with the Chinese Ministry of Foreign Affairs
(MFA) and the UK Foreign and Commonwealth Office
(FCO), LSE IDEAS hosts two senior officials from the MFA
each year, and gives them the opportunity to spend time
at LSE as visiting scholars, working on a specific research
project, interacting with LSE academics, students and other
experts from outside the LSE. The Chinese diplomats who
attend the programme are selected both because of their
academic and professional excellence and their potential to
become leaders and decision makers.
promised to offer 40 billion USD to buy the notes issued
by the IMF. I think we are the fourth largest contributor to
this scheme. Also, China exercised bilateral money swaps
with many countries, including Korea, Argentina, and other
developing countries. The total sum there is 650 billion
Chinese Yuan or almost 100 billion US dollars.
When the crisis hit, what were you called upon
to do?
Guo Xuejun is the third of the Chevening
What will you research on while at LSE IDEAS?
Fellows. IDEAS Today spoke to him about his career,
his current research, his take on US-China relations,
and his future plans.
What do you do at the Foreign Ministry?
I am currently the deputy division director responsible for
international economic organisations. That means the
Chinese relationship and participation in international
economic organisations, including the World Bank, IMF,
financial stability board, and the G20, group of eight,
the OECD, and the BRICs.
Have you always worked on economic issues?
I was posted to Africa for four years, between 1999 and
2003. And after that I spent three years in the Foreign
Ministry, with responsibility for the UN general assembly
and security council issues or political issues. And then in
2006 I was transferred to my current position.
In Africa, I worked at the Chinese embassy in the Saychelles
as a counsellor. The other posting was in Tanzania, where
my job was policy analysis and political cooperation.
I am not an economist but I was involved in issues related
to foreign affairs, like the institutionalisation of the G20
summit. I was involved in many Chinese cooperative
activities in tackling the global crisis.
Are you happy with the way China has come out
of the crisis so far?
I think so far, so good. I am so happy that the country
endured through the crisis, that my country survived the
crisis. But there is still much to do, such as increasing
domestic demand, managing inflation expectations, and
the inflow of “hot” money. There is too much hot money,
which raises concerns about currency devaluation, inflation
and liquidity in the market.
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This crisis
originated in the United
States and there is a line of spillover. The
‘effects’ first hit Europe and then Asia, and then Africa. So
we were not hit by the first wave of this crisis. But as the
Chinese market economy was integrated with the world
economy we could not avoid the crisis. I think we survived
because we adopted good policies. But the effect of this
crisis to China is still very big, with loss of jobs and closure
of factories. We have millions of people who have lost
their jobs.
A crucial step was the adoption of a huge stimulus
package, amounting to about four trillion Chinese yuan to
stimulate the economy. We stimulate the internal demand
when we could not on external demand. And in 2009 the
export contribution to GDP growth was under zero, but
overall GDP growth was 8.9%, which means that economic
growth was compensated by the domestic demand,
stimulated by the government’s package.
Some western critics say that China has not done
its share since the crisis broke out.
Actually, we contributed a lot to crisis prevention
internationally. First, we did much in our own country as
the third largest economy and the second largest exporter
in the world. The strength of the Chinese economy is
itself a contribution to the world economy. If the Chinese
market could perform well, this would mean the crisis
would be resisted in Asia and the developing world at large.
And secondly, China cooperated in in tackling the crisis
internationally. We participated in the G20 process and
promised to participate in the IMF facility scheme. China
In the last two years my job has been to analyse the world
economy in the wake of the crisis and propose some
policies to my boss. From the perspective of the political
economy – I am a diplomat, not an economist - I was
also involved in the preparation for the draft communique
of the G20 summit. We studied, we proposed, and
we amended.
In the US there are calls to pressure China to
revalue its currency. Do you think it’s time that
China took this step, or is your sense that these
calls are driven by domestic politics in the US?
The exchange rate is always a sensitive issue in the political
arena. We can all recall the disputes between the US and
Germany and the US and Japan. For me, it is not a purely
economic issue or financial issue. As for the reason for the
exchange rate, the overwhelming idea is that only by means
of this could we adjust the global trade imbalance. This is
the perspective of some people from the US. But a number
of academics argue the deficit countries must be the first
to adjust, and not the surplus countries. And also the
exchange rate adjustment must be aimed at price stability,
employment, and international stability. I don’t see any
value in the US suggesting that China adjust the exchange
rate. Actually, from 2005 China’s currency has appreciated
by 21% against the US dollar. And even so, US exports
remain only slightly changed. So the exchange rate is not
the problem between China and the US in trade issues.
What is the problem?
The problem is the development idea and concept – the
growth model. The US dollar is the major reserve currency,
covering 68% of global reserves, so the US enjoys this
special privilege with reserve money. And also with US dollar
the US could enjoy low deflation and a large trade deficit
for a long time. But I’ve noticed that the saving rate, the
domestic savings rate is rising, and hopefully this is a
good start.
My academic advisor here is Professor Westad. It is still
developing, but as we’ve discussed so far my focus will be
global economic governance. I chose this topic because
more and more foreign affairs officials are involved in the
economic issues in international relations, like the G20.
About half of the G20 sherpa are from vice foreign
ministers with teams from their respective Foreign Ministries.
This means that the diplomats are increasingly involved in
the international economic cooperations. I think this will
continue in the post-crisis era. I think my job is to observe
this development and refine my approach to G20 issues,
with support from LSE academics to help outline
the shape of future economic governance or future
economic architecture.
My preliminary thinking is to focus on three areas. First, to
focus on the concept of governance structure. As President
Hu Jintao proposed, the initial outlines of economic
cooperation of the four systems in 2008 summit in
Hokkaido, the economic system, the trade system, financial,
and monetary system. That’s one of the resources that I
could draw on. The second area is the political impetus or
guidelines for the governance structure. The G20 might
take the lead, but it has its own shortcomings. It is still
undergoing its institutionalisation. And the third is about
the pillars of the institutions supporting the governance
structure. What the UN could do, what the IMF and
World Bank reforms could do along with their ongoing
governors reform process. This also includes what the Bank
of International Settlement and the WTO in promoting
globalisation and free trade. And what the UN could do in
promoting the Millennium Development Goals.
The topic covers a lot, but I have less than four months
here. I’m not going to study only one area; I am not an
economist, I just want to find some useful ideas and refine
my ideas with the support of academic resources here. I
think my topic will focus on the general outlines and
not the details. ■
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