Putin and Wen, 'Cocky' No More

APParticipants enjoying a lunch buffet during the opening day of the World Economic Forum in Davos on Wednesday.
DAVOS, Switzerland — When Wen Jiabao and Vladimir Putin were invited to speak at the World Economic Forum, China and Russia were supposed to be saviors of the global economy as the United States fell into recession.

No more.

As the Chinese and Russian prime ministers addressed the opening of the annual meeting in Davos on Wednesday, they were disappointing those who bet that their economies would help power the world through the slump and weakening their case for a greater say among global leaders.

"The Chinese and Russians are no longer as cocky as they were about six months ago," said Huang Jing, a political science professor at Singapore's Lee Kuan Yew School of Public Policy. "They became prosperous because they were integrated into the international economic system, and now they realize there's a price they have to pay."

Russia, the largest oil exporter behind Saudi Arabia, expects its economy to shrink 0.2 percent this year, after growth that averaged 7 percent in the past decade. China, the biggest contributor to the global economic expansion in 2007, is already in a recession, said Nouriel Roubini, the New York University professor who predicted the onset of the crisis.

While Goldman Sachs chief economist Jim O'Neill predicts that the BRIC economies of Brazil, Russia, India and China will cushion the developed world's recession, investors aren't so sure. Equities in the four nations declined 58 percent last year, exceeding the 42 percent drop in the MSCI World Index.

"We have blindly presumed that BRICs are synonymous with long periods of hypergrowth," said Stephen Roach, chairman of Morgan Stanley Asia. "This crisis draws that presumption into serious question."

Touted at last year's Davos meeting as "an island of stability" by Finance Minister Alexei Kudrin, in the past six months Russia has drained $201.9 billion, or 34 percent, of its reserves to stem a 30 percent slump in the ruble against the dollar from a July record.

At Davos, "Putin will attempt to paint Russia as a willing player looking to deepen its integration into the global economy and eager to attract global investors," said James Beadle, chief investment strategist at Pilgrim Asset Management. "Sadly, Russia has berated and abused many of its global partners, and now that the stakes have balanced few will trust this new, benign rhetoric."

In China, a slowdown is among "pivotal" risks to a global recovery, the World Economic Forum said in a report this month. Declining power output and shrinking manufacturing suggest that it's already in recession, Roubini said.

As many as 4 million Chinese migrant workers lost their jobs last year as orders for everything from toys to textiles to home appliances slumped. Exports fell the most in almost a decade in December, and imports declined by the most since at least 1995.

Waning demand for the country's goods has led to protests by laid-off factory employees. "This is the moment when the decoupling theory has completely unraveled," said Glenn Maguire, chief Asia-Pacific economist at Societe Generale in Hong Kong. "China cannot be independent from the global economy, and it cannot grow autonomously."