The Weird Way of the Dragon

Now why on earth should the third titan behind big economies America and Japan, cash-rich China, buy 37,000 BMWs -- and that with a wobbling yuan dynasty? Strangely, this is exactly what Chinese did when they went on a shopping spree in Europe a few weeks ago. They have sealed a deal of $14 billion with Germany and will pump billions more in Spain and Britain.

As a gesture of goodwill, this sure as shooting matters. In the first place China is cashing in on precious savings to pre-empt protectionism in Europe. But the ebbing European market also opens up an opportunity to get access to knowhow and high quality goods. In many ways Beijing is bending the crisis into a chance to exceed her economic power in the long run. The global cash crisis is caning the Chinese cash-mill at her Achilles' heel. Struggling factories and floods of fired workers point to the paramount weakness of her export-led growth. But Beijing refuses to throw in the towel. While dynamising domestic consumption, she is grasping the gravity of uncertainty to upraise her cash clout abroad. If she succeeds in this two-sided step, the global balance of power will without doubt turn in her favour.

The "saving-the-strong-by-helping-the-weak" watchword seems to be her magic medicine though. A spanking stage of infrastructure building has not only to latch onto laid-off workers but also to allow companies to capitalise on forgotten corners of the Chinese market. Peasants will possess more subsidies for their crops. Soldiers, teachers and officials alike will get better paid. For better public services, for sure, but in the first place to fire up consumption. In the same vain, social spending and reduced value-added taxes have to convince citizens to save less and buy more homemade products. While alien investors ditch China's cash sector, the state steps in with fresh money to save her banks and to turn them in obedient policy devices. Investment in research and development has increased, and new projects will grow to green her future. This bravura is barely reversal of the Communist Party's policies. With a mix of Keynes, communism and capitalism, the development of a symphonic society has rather run into a higher gear.

Yet while Chinese care for economic defence at home, they eye an enduring cash counter-offensive abroad. Despite the domestic challenges, it is well aware that this is the moment to magnify their interests for the longer term. Chinese are therefore continuing to buy themselves a way into foremost foreign companies. In 2008, the value of outbound transactions pepped up by 35 percent. In the last months, Chinese investors have put their shopping spree on hold, but this is mainly a matter of waiting for more mouth-watering prices. They continue to comb the market for tiny and titanic companies -- particularly those in Hong Kong, Taiwan, Australia, Russia, Iran, Pakistan and India -- and with interesting high-tech knowhow or access channels to foreign consumer markets.

Chinese are cementing their grip over natural resources. While Western companies want for the ways to invest in innovative mining projects; their Chinese peers are dragging on to drill for oil and minerals. New projects came up in countries like Congo, Indonesia, Niger and Peru. Chinese players also plump for vital parts of the Australian mining empire. At a moment when commodity prices have plummeted, the central government geared up for funnelling parts of its financial reserves into strategic stockpiles of oil, special grade coal, copper and rare ores. This is not only allowing the Chinese to safeguard supplies but also to pilot future market prices. They are perking up their power by salvaging the struggling developing countries. With President Hu Jintao handing out millions of aid in Mali, Senegal and Tanzania and signing a 500-million-dollar loan pact with Pakistan, such support surely matters as a gesture of goodwill and a source of diplomatic drift.

Undeniably, Beijing will intensify her image as an Asian-amicable goliath. And Washington's wide rescue raft would be unthinkable without Beijing bolstering the former's treasury. It is scarcely a surprise to see how China-critics like Clinton are silenced. In Brussels, hardly anyone even thinks of teaching China about reciprocity and more moderate trade policies. This is not only because of the fact that we have all become mercantilists in some way. The American-and-European-Union posture confirms that the Chinese climbing cash power is indeed a hard nut to crack. Contrarily to the conservative policies of many Euro-states, the Chinese are hardly tenaciously trying to keep what they have. They are trying to use the crisis to get more and to do better. This operation is an overwhelming test for the party's leadership, though it is uncertain whether they will make it. If they do, the West will re-awaken in a different economic order.

Premier Wen Jiabao has got the jitters with his unusually vocal worries over whether Washington can make good on her $1 trillion debt to Beijing. But that concern could pale in comparison with Mr Wen's and Mr Jintao's other worries. Commentators have already claimed how the cash crisis is imperilling the implicit bargain between Beijing's one-party state and the public, which for the past two decades has been this: as long as the Communists can deliver consistent cash growth and growing living standards, the public will go along with their lack of human rights or voice in their government, and even enduring expanding corruption. Now the combination of climbing unemployment as manufacturing jobs disappear, recurrent safety scandals sparked by corruption  -- from tainted consumer products to poor building construction -- and serial spates of unrest, ranging from rural labour protests to the Charter 08 petition, all challenge the Communists' vision of legitimacy and perhaps even their rule.

But Beijing has mastered the art of survival and sharpened up her ability to deal with disorder -- witness the roundup of dissidents and widespread watching before the Olympics, or lockdown in Tibetan areas. Why would this year be any different? Here is where the Deng Xiaoping theory comes in to play. Beijing has successfully suppressed dissent and dictating power in the past because of the elites' own relative unity. But gradual growth, shrinking patronage and the unprecedented pressures fuelled by the financial crisis could cause fissures amidst the party elites.

In-between this spaghetti-style scenario, China could still go on outgrowing most other countries in the upcoming years -- no matter even if the World Bank still suspects Beijing's just-six-and-a-half-percent growth, unemployment and the risk of instability will increase.

Cyrus G. Robati is a freelance writer concentrated on South Asia, Asia Pacific, the Middle East and Latin America