China greets G20 results with caution

If Nicolas Sarkozy claimed credit for much of the progress at the G20 summit and Barack Obama won plaudits for his nimble diplomacy, China gave a more cautious welcome to the results of the meeting.

In the absence of the sort of presidential press briefing that many countries conducted, Chinese officials yesterday listed a number of their own achievements from the London summit, however they also acknowledged some of China's main priorities were not addressed.

Officials said they were pleased with the announced reforms of the International Monetary Fund, which include the end of the Europe-US monopoly on the leaders of the IMF and World Bank and the promised reform of the quota system to give China a larger say. While Gordon Brown, UK prime minister, said China would inject $40bn (€30bn) to the IMF's coffers, officials said the details of China's contribution were still under discussion.

More generally, if the headline numbers about funding for the IMF and the boost to trade finance materialise, economists said this could be very beneficial to China's export machine.

“Given that some 30 per cent of China's GDP growth in recent years has been driven by external demand, we believe that China will benefit significantly from these measures,” says Stephen Green at Standard Chartered.

Against that background, however, some of the most important issues for China saw little progress at the London summit. The commitment to avoid protectionism, one of China's biggest fears, was relatively vague, and having already announced a large fiscal stimulus plan for the next two years, China was hoping for more action on this front from other countries.

China signalled in the run-up to the summit that it wants to throw its weight around a lot more in international economic affairs, however the sorts of priorities that China will defend remain unclear. The London summit gave some clues.

The dispute over tax havens, which only ended after Mr Obama brokered a compromise between France and China, illustrated how strongly China will defend its sense of sovereignty in economic issues.

China has generally supported the G20 push to strengthen financial regulation – President Hu Jintao would have no problems with Mr Sarkozy's claim that the days of the “Anglo-Saxon mode” are over. However, China has mostly supported measures that would boost regulation in western countries, such as controls on hedge funds and ratings agencies. Mr Hu's opposition to publishing a list of tax havens that might include critcism of Hong Kong and Macao indicates China's reluctance to see a new international regulator that might influence its own financial system.

Diplomats say there was another factor. Both China and India, they claim, fear that any new international financial watchdog will be dominated by Europe and the US, in the way the IMF and World Bank has been.