Take wait-and-see approach to US sanctions
Today marks the deadline of the US requiring other countries to stop making oil deals with Iran. Many have promised to cut imports of or stop buying oil from Iran so as to become exempt from US sanctions. China is so far the only big country that has not been granted a waiver. It will be interesting to see if the US piles sanctions on China's State-owned enterprises (SOEs) which still have oil deals with Iran.
China is unlikely to compromise with the US. Firstly, a large percentage of automobiles on China's roads use oil from Iran. Secondly, China adopts a friendly policy toward Iran.
Only a UN resolution can restrain China's stance toward Iran. Being a big country, China should maintain this bottom line.
But the US' influence is obvious. Its financial sanctions can harm Chinese companies. Confronting the US with a tough attitude is not the best choice for China. It's right for China to remain low-key in declaring its stance. Over the Iran issue, there is a distance between verbal declaration and real actions.
Similarly, the Obama administration does not want to punish China seriously because it will put the US economy at great risk. China has its own advantages. Once the US slaps sanctions on China's SOEs, some American companies in China will bear the consequences.
Obama knows full well that he should make a show of taking a tough attitude toward Iran to win the coming presidential election. But if a trade war occurs at this point, it also means the end of his political life.
The Chinese government should deal with the US' demand perfunctorily. China should neither collide with Obama nor promise anything to the US. Next, China should take it easy. If Washington launches large scale and substantial sanctions against China, it can only respond with countermeasures. It is a troubling, even annoying scenario. But if China cannot avoid it, it should face it squarely. The consequences of US sanctions may not be as fearsome as we had thought.
Many large State-owned companies have big investments in Iran. But a few SOEs are seemingly more conciliatory than the government. Some have stopped or cut trade with Iran. In this major issue, SOEs should support the national stake, not prioritize their own interests.
The teeth in Washington's sanctions largely rely on its control over the global financial system. When the sanctions are imposed, money transactions to Iran from overseas will be extremely difficult. Oil tanks carrying Iranian oil will not be able to find insurers.
Financial sanctions are choking Tehran. China needs the wisdom and strong will to respond to US sanctions. It cannot launch countermeasures until it feels ready. Besides trade, China needs substantial growth in financial power to resist US sanctions.
If Washington is compelled to find faults with China, it will be of no help to fear it. This is the philosophy China should have in dealing with the US.
Growth, fairness not mutually exclusive
In recent years, Chinese people's demands for more social equality have dominated public opinion, along with people's soaring requirements on livelihood and mounting dissatisfaction with the wealth gap. This has pushed China to invest more in public welfare.
But at the same time, the emphasis on development seems to be ignored. Public opinion is shaping a perception that the country is wealthy enough and substandard public welfare is a result of unfair distribution.
Once it is resolved, a solution will be found to the primary problems regarding public welfare.
Unfair wealth distribution does deserve strenuous efforts from the government, but it should not eclipse the importance of growth. Livelihoods cannot be improved by distribution reform alone. Stable and continuous development is the driving force of reform.
Chinese society before reform offers a good comparison. Life was fair, but people were poor. The later reforms in both rural and urban areas firstly set to break the old mindset of fair distribution. Work-based payment was adopted as a new measure of social fairness.
Three decades of fast development have resulted in overwhelming apathy toward the income gap today. There are various reasons for this. However, China cannot stop its development for the sake of fair distribution, but should create a mechanism to coordinate between growth and distribution.
This is a daunting challenge and many countries have suffered from this nagging issue. Emphasizing efficiency alone could lead to recurring social turbulence.
But countries, long stuck in a debate over the fairness of distribution, would also miss growth opportunities. Many developed countries have bitter memories of this.
True sustainable development has to be based on social fairness. It is also an essential political environment for China. Otherwise, development will be fragile and it will be difficult to tell how long it can last.
China has created a growth miracle. It now needs a miracle of creating new social fairness. The most important thing is to strike a good balance between the two ends.
China's population is almost double the total of the West. Improving the livelihood of the Chinese population cannot simply be done by a slogan or a policy. It requires much detailed planning and coordination. We also need good luck.
(Dated 27/06/2012)
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