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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. 20 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. ■ 21