Scan the bare figures and China appears to be on the skids. Exports are plummeting, experts are slashing growth forecasts and unemployment could rise to its highest level since 1949, the year the People's Republic was founded. But if President Hu Jintao feels the heat, he isn't letting anyone see him sweat. Despite the massive challenges Beijing faces, the Chinese leadership seems to regard 2009 much as Michael Corleone viewed the day of his godson's baptism in The Godfather this year, China settles all business.
Once shy of making major foreign investments, Beijing has gone on the prowl for resources and underpriced assets across the globe. Cash-rich Chinese companies, backed by soft loans from state banks and re-energized by lower labor costs as jobs dry up, are descending on Central Asia, Africa and even Western Europe to snap up assets. State mining company Chinalco has tabled a $19.5 billion bid for British-Australian resources giant Rio Tinto. Beijing has launched a fund to buy distressed assets worldwide, inked a deal with Brazil's Petrobras and provided Russia with a $25 billion loan in exchange for a secure future stream of oil and gas. (Overall, Chinese enterprises are on track to invest double the amount abroad this year than in 2008.) And compared to the past, when Western stockholders expressed concerns about selling assets to China, today companies are just glad for the cash. China's Export-Import Bank, for instance, has offered Rio a $20 billion loan if the deal (which is stalemated) goes through.
More ambitiously, against the backdrop of a weakened West, Beijing sees an opportunity to assert itself globally. China has promised to buy International Monetary Fund bonds to bolster the organization, provided it gets a greater say in the IMF, and it has called for the creation of a new international reserve currency to replace the greenback. Though this idea is unlikely to ever become reality, just by floating the possibility, Beijing is signaling to the world that it wants to be a major player.
Beijing is also taking political advantage of the global economic meltdown. Western countries are strikingly reticent these days about criticizing China's human-rights abuses, not least, perhaps, because Beijing has, for the first time, started warning the West not to take for granted its massive investments in their currencies and bonds. Capitalizing on this grace period, China has shored up its ties to repressive states such as Iran by signing a $3 billion natural-gas deal, challenged American ships off the coast of China and cracked down hard in Tibet for the 50th anniversary of the 1959 uprising. Yet Beijing has largely avoided high-level censure. In Washington, the State Department released a statement on the repression in Tibet in the name of a spokesman, rather than in the name of Hillary Clinton or Barack Obama, thereby making the message far less consequential.
China's leaders are using the crisis to point out what they regard as flaws in Western capitalism. On a visit to Europe in January, Premier Wen Jiabao called China a "great power" and then criticized "an unsustainable model'' of development in the West that partnered a lack of savings and "blind pursuit of profit." Vice President Xi Jinping, on a recent trip to Mexico, blasted his hosts for harping on China's human-rights record, saying "there are a few foreigners, with full bellies, who have nothing better to do than try to point fingers at our country."
But this strength-from-weakness strategy could hurt Beijing. Time abroad could distract China's leaders from their pressing domestic problems for all its sophistication, the Chinese Communist Party has failed to develop any effective local troubleshooters other than Wen. For years, moreover, Chinese nationalists have been calling for exactly a tougher line toward the West. Now, Beijing's new aggressiveness overseas could embolden the nationalists a trend that would alienate China's neighbors.
Still, Beijing has won big playing this game before. During the Asian financial crisis in the late 1990s, China refused to devalue the yuan, which helped prevent a further run by speculators on Asian currencies. All the while, Beijing reminded other Asian governments of how the West had failed to come to their rescue. By the end of the crisis, China, previously viewed with suspicion by its Asian neighbors, had built a reputation as a benevolent regional power. During last month's session of China's National People's Congress, President Hu said: "Challenge and opportunity always come together. Under certain conditions, one could be transformed into the other." Right now, those conditions are breaking China's way.