Obama, China's President To Meet At G-20

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President Obama also will have a separate meeting Wednesday with Chinese President Hu Jintao. They are likely to discuss the global economy and a possible North Korean missile launch.

STEVE INSKEEP, host:

So, that's one relationship; let's talk about another. Many parts of the world are looking to the U.S. and China to take the lead in solving the economic crisis, and that will be the topic for President Obama and his Chinese counterpart when they meet in London. As NPR's Anthony Kuhn reports, China is demanding a larger role in restructuring the global financial system.

ANTHONY KUHN: Beijing has been staking out its position at the G-20 for several weeks now. Last week, China's Central Bank Governor, Zhou Xiaochuan, called for a new international reserve currency to replace the dollar. Many economists see this as impractical for now, and believe that Zhou's real message was just that China wants respect commensurate with its growing economic clout.

Professor BARRY NAUGHTON (Chinese Economy, University of California San Diego): I think that it's an important willingness to speak out more on issues that China has a stake in.

KUHN: Barry Naughton is an expert on the Chinese economy at the University of California San Diego.

Prof. NAUGHTON: But at the same time, China is the world's third-largest economy and in just a year or two, it will be the world's second-largest economy. So, it's a very natural thing that China should have a significant voice in global councils about these economic issues.

KUHN: Earlier this month, Chinese Premier Wen Jiabao made a plea for Washington to preserve the value of China's billions of dollars in U.S. Treasury bond holdings.

Mr. WEN JIABAO (Chinese Premier): (Through translator) We have lent huge amount of money to the United States. Of course, we are concerned about the safety of our assets. To be honest, I'm a little bit worried.

KUHN: Beijing's concern is that the U.S. may print so much money to deal with the current crisis that the dollar plummets and with it, the value of China's U.S. bond holdings. But China hasn't offered any prescriptions for how the U.S. should better regulate its financial markets. Again, Barry Naughton.

Prof. NAUGHTON: Everybody recognizes that a regulatory overhaul is needed, but it will be so dramatically shaped by U.S. domestic politics that I think most foreign leaders recognize that, you know, they can push for something substantive, but they're not going to have very much influence on the specific outcomes.

KUHN: Analysts say that Beijing may feel vindicated that its highly regulated financial system has suffered less damage than that of the U.S. But Michael Pettis, who teaches finance at Beijing University, says this may not last.

Professor MICHAEL PETTIS (Finance, Beijing University): Now, my guess is that by next year we're going to see real problems in the Chinese financial system. So, that perception that highly regulated systems are less prone to crisis will probably whither away.

KUHN: Pettis warns that the effect of China's nearly $600 billion fiscal stimulus package has been to boost production more than consumption. This may create employment now, but it won't last if foreign consumers aren't buying China's exports. Pettis also predicts that the main players at the G-20 -China, Europe and the U.S. - have such different interpretations as to the causes of and solutions to the current crisis that any meaningful consensus is highly unlikely.

Anthony Kuhn, NPR News, Beijing.

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