China's Xie Runs Home to Fix Economy

As Dani Rodrik, who saw this item first, said, "Why do I think this is really bad news?" Remarkably, the article suggests that XIe might not attend the November 15 summit in Washington to discuss the future of the world financial order. This would be particularly noteworthy given China's strong desire to push for a change in the currency regime.

From Bloomberg:

China's Finance Minister Xie Xuren was called back from an international economic conference in Peru before the meeting began, following orders from Beijing to help resolve problems at home...

``They told him he has to resolve an economic problem and that he's the only one who could do so,'' de Swinnen said. ``He was complaining because he had to fly 32 hours to get here and then he had to fly another 32 hours to get back.''

China's largest banks, with 4 trillion yuan ($586 billion) of cash, are resisting government efforts to boost lending to 42 million small and medium-size companies that drove the economic boom of the past decade. On Nov. 2, the central bank scrapped curbs on loans after three interest rate cuts in seven weeks failed to revive economic growth that has sagged to its slowest in five years.

Half the nation's toy exporters have closed this year, and 67,000 smaller enterprises filed for bankruptcy in the first half, according to government statistics. Companies with assets of less than 40 million yuan provide three-quarters of urban jobs and 60 percent of China's gross domestic product...

Xie arrived in Beijing to take care of some ``urgent business,'' two finance ministry officials, who declined to be named, said today. They didn't elaborate....

Xie will not attend the Group of Twenty meetings in Sao Paulo, Brazil, this weekend, one finance ministry official said. Xie's attendance for next week's Washington summit on financial crisis is yet to be confirmed, the official added.

Credit Crunch May Produce Another Food Crisis in 2009

Restricted credit and access to foreign exchange may lead farmers to cut production, worsening agricultural price pressures. From the Financial Times:

The world might face a repeat of this year’s food crisis as the credit crunch encroaches on the agricultural market, leading farmers to cut their planting because of falling prices and lack of finance to buy fertilisers, the United Nations warned on Thursday.

“Riots and instability could again capture the headlines,” the Food and Agriculture Organisation said.

The warning was made despite a fall in the price of most agricultural commodities as farmers harvest bumper crops...

“Under the current gloomy prospects for agricultural prices, high input costs and more difficult access to credit, farmers may cut their plantings, which might again result in a tightening of world food supplies,” the FAO said in the report....

Concepción Calpe, a senior economist at the FAO in Rome, said a price surge might take place in the 2009-10 harvesting season, “unleashing even more severe food crises than those experienced recently”.

Lower production and higher prices next year could add to developing countries’ problems in obtaining sufficient credit and foreign exchange to buy agricultural commodities. “Export finance is becoming more difficult to obtain, with banks tightening up the conditions for issuance of letters of credit,” the FAO said.

Thailand and Iran agreed last month to barter rice for oil, the clearest example yet of how the financial crisis, high fuel price and scarcity of food are reshaping global trade.

In spite of the continuing fall in food prices, the world’s food imports’ bill is set to surge above $1,000bn (€785bn, £633bn) for the first time ever, up 23 per cent from last year and 64 per cent higher than in 2006, the FAO said.

Developing countries will spend $343bn this year on food imports, up a record 35 per cent from last year’s $254bn. Some poor countries, the organisation said, were curtailing food imports in an effort to lower their bills.