The Reckoning

When Chinese Eyes Are Smiling

China’s heir apparent made a minor splash last week in the United States, playing it safe in his Washington rounds and turning up seemingly genuine charm by visiting old friends he made 30 years ago in Iowa as a young man. But where he went next has received little attention - but merit some. Ireland - yes, poor, bailed-out, austerity-afflicted Eire, was the place Xi Jingping, putative third (or fourth?) most powerful man in the world, chose as a next act. Not Brussels, Berlin, London or Paris. Not Moscow or Cairo, either. Perhaps more relevantly, not Madrid, Rome, Lisbon or Athens, either - all places where officials have recently sent urgent inquiries to Beijing with regard to the prospect of a loan. Xi, now China’s vice president, is expected to succeed Hu Jintao when he retires as leader of the Communist Party this year and as president next year. With Europe figuring as China’s number on export market, he has every reason to sincerely mean what he told the Irish Times Saturday – that “the difficulties facing Europe are temporary, and the EU and the governments and people across Europe have the ability, the wisdom, and the means, to solve the sovereign debt problem and achieve economic recovery and growth.” We’ll see about that. But what seems very clear is that Ireland, whose debt crisis is somewhat different in nature from that of its fellow “PIIGS,” looks like a fairly good buy right now if you’re an emerging power with cash laying around the old sovereign wealth fund. (China’s SWF is thought to hold about $400 billion). Ireland also has a very healthy export sector.
  Ireland, with its low corporate taxes and educated, English-speaking workforce, was laid low by a real estate bubble that forced the nationalization of its banks and destroyed the wealth of many people who had been sucked into the bubble. That said, Ireland’s fiscal policies had not been reckless, nor are its growth prospects negligible (which is the main problem for Italy, Greece and Portugal) or its labor markets inflexible (the previously mentioned countries, plus Spain). Comparitively speaking, Ireland has taken its bitter medicine and, while people rightly wonder about being brow-beaten into austerity by Berlin, Irish guilt or some other force apparently has kept political backlash to a minimum.
This makes Ireland a great deal more attractive as a base for Chinese investments than other ailing Eurozone nations. Xi made all the kinds of statements visiting dignitaries produce during these visits - praising Irish agriculture, claiming there’s great opportunity in China for Irish companies. But in all the talk of China riding to Europe’s rescue recently, Beijing has done very little of substance. It may be that Xi’s visit to the Emerald Island is a sign that China has chosen it port of entry.