With Jamaica's currency in free fall, unemployment soaring and banks heavily exposed to government debt, the Caribbean island's diplomats went into crisis mode earlier this year. They traveled to all corners of the world to seek help.
Jamaica's traditional allies, the United States and Britain, were preoccupied with their own financial problems, but a new friend jumped at the opportunity to come to the rescue: China.
When contracts for loan packages totaling $138 million were signed between the two countries in March, China became Jamaica's biggest financial partner. Headlines in Jamaica's leading newspapers, which only a year ago were filled with concern about China's growing influence in the region, gushed about its generosity.
"The loan couldn't have come more in time and on more preferred terms," E. Courtenay Rattray, Jamaica's ambassador to China, said in an interview. While the island nation continues to value its close relationships with Western powers, he added, in some respects Jamaica has more in common with China. "Those are developed countries. They don't have such an in-depth understanding of the development aspirations of Jamaica as does China," he said.
Overseas aid and loans are just one way China is asserting itself in its new role as a world financial leader. While polishing China's own image, Premier Wen Jiabao and other top leaders have blamed the West for the global economic crisis. Chinese officials increasingly are challenging the primacy of the dollar, warning other countries about the danger of keeping reserves in just one or two currencies, such as dollars and euros. And as the global economic crisis has eroded faith in U.S.-style capitalism, there's growing talk that a new "Beijing Consensus" will replace the long-dominant Washington Consensus on how developing countries should manage their economies.
Coined by British economist John Williamson 20 years ago, the term "Washington Consensus" refers to a standard set of policies — including privatization of state enterprises, free trade, deregulation and restraint in public spending — that the International Monetary Fund, the World Bank and the U.S. Treasury Department have long urged on debt-ridden nations, particularly in Latin America.
A fierce debate has broken out among academics and financial policymakers about how to define the Beijing Consensus, or even whether such a thing exists; many say that it is a loose package of political points rather than an economic model, and that there is no formal effort by the Chinese government to promote it. But some experts are already calling it a challenge to the existing order.
"It is very possible that the Beijing Consensus can replace the Washington Consensus," said Cui Zhiyuan, a professor of public policy at Tsinghua University who edited a recent book on the subject. "Since the crisis, the world doesn't have as much confidence in the U.S. economic model as before."
In a report last month titled "The Beijing Consensus," South Korea's Ministry of Strategy and Finance sounded an alarm over China's aid and loans. Developing countries that accept Chinese assistance, it warned, may lower their guard and gravitate toward a Chinese-style economic model.
Jamaica's Rattray dismissed those fears as overblown. China's financial assistance to his country came with "no requirement to adopt specific macroeconomic policy approaches," he said, and there is "no debate about the government of Jamaica's commitment to a free-market economic model."
Cheng Enfu, an economics researcher at the Chinese Academy of Social Sciences, a government-affiliated think tank, said he defines the Beijing Consensus as promotion of economies in which public ownership remains dominant; gradual reform is preferred to "shock therapy"; the country is open to foreign trade but remains largely self-reliant; and large-scale market reform takes place first, followed later by political and cultural change.
The global economic crisis, Cheng said, "displays the advantages of the Chinese model" and has already expanded China's influence. "Some mainstream economists are saying that India should learn from China; Latin American countries are trying to learn from China. When foreign countries send delegations to China, they show interest in the Chinese way of developing," Cheng said.
Barry Sautman, a political scientist at Hong Kong University of Science and Technology, said in a research paper that Western academics often deride the Chinese model as "economic growth without the constraints of democratic institutions." But, he argued, the emerging Beijing Consensus "takes seriously some aspirations of developing states often ignored or opposed by the West," such as "a more equitable international distribution of wealth and power."
As Beijing grows more assertive in international finance, it is working inside as well as outside existing organizations. In January, it joined the Inter-American Development Bank — which is active in Latin America and the Caribbean — as a donor country. It is in talks with the IMF to increase its contribution to the fund in exchange for more of a say in IMF policies. And in Asia, it is leading the push by the Association of Southeast Asian Nations for a regional fund that will compete with the Asian Development Bank.
This week, China's allies Kazakhstan and Pakistan — both of which recently got new loans from China — threw their support behind calls from China's central bank governor, Zhou Xiaochuan, to create a new world or Asian reserve currency to replace the dollar. Venezuelan President Hugo Chávez, who also signed a credit line with China recently, has backed the proposal.
In the past five months, China has signed $95 billion in currency swap agreements with six countries that now hold part of their reserves in yuan. The government has also begun to allow companies in southern China to settle contracts with foreign neighbors in yuan instead of dollars or euros.
Nouriel Roubini, a professor at New York University who as far back as 2006 predicted a U.S. economic collapse triggered by a housing bubble, said in an interview that the financial crisis has shown that "different countries grow in different ways, and nobody has the monopoly on that type of wisdom." While he does not expect any immediate change in the international monetary system, he said, in five to 10 years "the Chinese currency could be the new reserve currency."
But Michael Pettis, a senior associate at the Carnegie Endowment for International Peace and a professor of finance at Peking University, says China's recent moves are more about public relations and aiding diplomatic allies than a true effort to remake the global financial system or to push a new model of development. Beijing has long used foreign aid to encourage developing countries to stop recognizing Taiwan — as Jamaica did in 1972 — and the talk about creating a new international "supercurrency" may be mostly a warning to the United States not to cover mounting deficits simply by printing money.
"It's about signaling concern about U.S. monetary policy," Pettis said.
At an economic forum in the southern Chinese city of Boao last weekend, China's leaders seized every opportunity to criticize Western countries and institutions.
China's top banking regulator, Liu Mingkang, called the recent Group of 20 meetings in London and Washington "mainly lip service without many concrete actions." Former vice premier Zeng Peiyan said that if the United States wants to continue receiving "foreign funding support," it should guarantee the value of its Treasury securities to countries that buy them. And Zheng Xinli, deputy head of the China Center for Economic Exchanges, an influential new research center, called for a new Asian development bank to compete with Western-dominated institutions.
Researchers Zhang Jie in Beijing and Robert E. Thomason in Washington contributed to this report.