The recent financial loss of China resulted from the depreciation of the dollar provoked nationwide criticism of the government decision making process. People questioned the reasonability of decisions on policy making in terms of buying national debt of America.
The public raised objection to the necessity of buying American debt on such a large scale and the blackout of information about the distribution of the foreign reserve. Some maintained that the money the government lost for depreciation of the dollar could be allocated to other department to improve the living standard and accused the government of making sour attempts to make profits through its foreign investment and strengthen its clout to counter some of the U.S “Contain China” policy economically.
The complaints might be reasonable by glance. However, the premises should be made clear before we have any in-depth discussion on this matter. First of all is the nature of the money. Apparently, the public has a misconception that all of the money of the government is the same and is not divided into different sections to achieve various strategic goals.
Undeniably, the money we lost could make contribution to the development of the welfare in China. But the question is that whether this money should be relocated to promote the social welfare or not. Obviously, the public has no idea that the function of this part of the foreign reserve is irreplaceable and their demand for better living quality should be realized through more effective management of the government expenditure rather than foreign reserve.
Even if we spend this part of the foreign reserve on the social welfare, it makes little difference for it only accounts less than 1% of the government expenditure. The attackers must prove that why this 1% would be so special that it will put a dent in changing people’s life when compared with the rest of the money.
After making the boundary of the discussion clear, the necessity of such investment could be mooted. According to the interdependence theory in international relations study, the more China is economically interwound with the U.S, the more China is likely to shake off more economic restraints imposed by the U.S.
The reason is simple. The U.S has to sacrifice more of its own interests to destroy Chinese economy when they are closely interconnected and interdependent as the economic stability of each other becomes the precondition of economic prosperity for both countries. Therefore, the chance for the U.S to take excessive contain policy against China would be largely reduced and the chance for China to remove the restraints imposed by U.S grows for the elimination of the constraints is in accordance with the interests of both of the countries in this sense.
People also argue that because of the presumed severely asymmetrical dependence between the two, China, in fact, could not leverage the U.S policy. To begin with, although the dependence between the two is still asymmetrical, it is not as so unbalanced as it is assumed to be. China now is much stronger economically than those Arabian countries.
Being one of the largest importers of the U.S and its most important trade partner, China exerts influence which is stronger than it seems on the U.S economy. For instance, U.S demand for appreciation of RMB evanesced when China showed inclination to support the Euro during Premier Wen’s visit to Europe.
What the China did in the recent financial crisis to bail the U.S out could be an excellent proof. Moreover, the 12%, the largest share held by a single country, of the U.S national debt held by China becomes in reality an economic nuclear bomb. If China sells it, the U.S economy will surely be damaged. Nonetheless, Chinese economy will also be devastated in the meantime due to interdependence. Therefore, the mutual destruction is evidently assured.
Though the public is entitled to a transparent government agenda, they are not entitled to know national secrets. The blind exposure of national secrets to the public will result in the function of the government and the state will break down. Also, the expansion of the policy making group will not necessarily lead to an increased rationality in the policy making process. The enlarged involvement of social parties which are highly possible to be interests groups in China would cause the manipulation to burgeon, making the policies serve simply the interests of the minority of the society.
The actual problem that needed to be solved has nothing to do with the distribution and use of the foreign reserve. What needs improvement in this case is the way that government negotiates with the public. Albeit it might be hard for the public to understand and agree with all of the economic theories and strategic purposes of the country that are behind the policies, the government should still inform the public more of the decisions to avert the abruptness to the public.
Wenxiong Zhang who is a student at China Foreign Affairs University is an intern at the 4th Media.