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Wednesday 8 October 2008
World Shouldn’t Foot US Bill
CHINA’S banking regulator denied that Beijing might ride to America’s financial rescue, while a leading state newspaper said on Tuesday that the world should avoid paying for the United States’ own mistakes. PDF
BEIJING - CHINA’S banking regulator denied that Beijing might ride to America’s financial rescue, while a leading state newspaper said on Tuesday that the world should avoid paying for the United States’ own mistakes.
The China Banking Regulatory Commission denied its head, Liu Mingkang, had said ‘China might consider injecting liquidity into the United States to help it save the market’.
The China Business News said Mr Liu made the remarks at a recent World Economic Forum conference in Tianjin, northern China.
‘Liu Mingkang has never made such comments anywhere. The story is totally groundless,’ a CBRC spokesman said in a statement posted late on Monday on the agency’s website.
Speculation is swirling that China, with US bonds making up the lion’s share of its US$1.81 trillion (S$2.7 trillion) in foreign exchange reserves, the world’s biggest stockpile, could have a role to play in any globally coordinated response to the global banking crisis centred on Wall Street.
A Hong Kong newspaper reported on Monday that China was planning to invest another US$200 billion in US Treasury bonds.
The central bank said it had no information to that effect.
The Chinese-language International Finance News, a newspaper run by the People’s Daily, on Tuesday quoted Mr Liu Yuhui, an economist at the Chinese Academy of Social Sciences, as saying the Chinese government was on the horns of a dilemma.
‘If China does not participate in the US bailout plan and that causes the financial crises to sweep over the real US economy, then the damage to China will certainly be very great,’ it quoted Mr Liu as saying.
‘China’s bind is that if the Chinese government actively participates in the US bailout plan, that will mean the government assumes some of the bailout risk. If the bailout plan is aborted, China may be dragged in even deeper,’ he added.
‘Another disaster’
A front-page commentary in the overseas edition of the People’s Daily said the US$700 billion rescue approved by Congress last week could play only a temporary stabilising role and cannot fundamentally resolve US global financial problems.
The commentary by Mr Shi Jianxun, a professor at Shanghai’s Tongji University, said Washington’s rescue plan would compel the United States to resort to deficit financing that would cause the dollar to fall, exacerbating global inflationary pressures.
‘For countries experiencing high inflation, this undoubtedly is a yet another disaster,’ he wrote.
The People’s Daily is the official newspaper of China’s ruling Communist Party. The overseas edition is a smaller circulation offshoot of the main paper.
Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent similar comments, amount to a quiet chorus of scepticism about Washington’s economic policies and global financial dominance.
Other countries should ‘avoid as far as possible footing the bill the for US bailout, while also joining hands to counter the financial crisis and actively promoting reform of the global financial and currency system that now maintains the hegemonic position of the US dollar,’ Mr Shi said.
The US bailout was merely an emergency measure that treated the symptoms, not the disease, he said. It was for America to pay its way out of a crisis brought about by its dereliction of oversight.
Mr Shi said there was a risk of a deep economic decline that would quickly spill over to Europe and Japan. In those circumstances, Asia would find it very hard to keep its footing.
Washington would be tempted to pay off old debt by issuing new debt, setting what Mr Shi called an odious precedent.
‘The US$700 billion bailout plan may drag the world into a new financial crisis,’ he said.
1 comment:
World Shouldn’t Foot US Bill
Reuters
7 October 2008
BEIJING - CHINA’S banking regulator denied that Beijing might ride to America’s financial rescue, while a leading state newspaper said on Tuesday that the world should avoid paying for the United States’ own mistakes.
The China Banking Regulatory Commission denied its head, Liu Mingkang, had said ‘China might consider injecting liquidity into the United States to help it save the market’.
The China Business News said Mr Liu made the remarks at a recent World Economic Forum conference in Tianjin, northern China.
‘Liu Mingkang has never made such comments anywhere. The story is totally groundless,’ a CBRC spokesman said in a statement posted late on Monday on the agency’s website.
Speculation is swirling that China, with US bonds making up the lion’s share of its US$1.81 trillion (S$2.7 trillion) in foreign exchange reserves, the world’s biggest stockpile, could have a role to play in any globally coordinated response to the global banking crisis centred on Wall Street.
A Hong Kong newspaper reported on Monday that China was planning to invest another US$200 billion in US Treasury bonds.
The central bank said it had no information to that effect.
The Chinese-language International Finance News, a newspaper run by the People’s Daily, on Tuesday quoted Mr Liu Yuhui, an economist at the Chinese Academy of Social Sciences, as saying the Chinese government was on the horns of a dilemma.
‘If China does not participate in the US bailout plan and that causes the financial crises to sweep over the real US economy, then the damage to China will certainly be very great,’ it quoted Mr Liu as saying.
‘China’s bind is that if the Chinese government actively participates in the US bailout plan, that will mean the government assumes some of the bailout risk. If the bailout plan is aborted, China may be dragged in even deeper,’ he added.
‘Another disaster’
A front-page commentary in the overseas edition of the People’s Daily said the US$700 billion rescue approved by Congress last week could play only a temporary stabilising role and cannot fundamentally resolve US global financial problems.
The commentary by Mr Shi Jianxun, a professor at Shanghai’s Tongji University, said Washington’s rescue plan would compel the United States to resort to deficit financing that would cause the dollar to fall, exacerbating global inflationary pressures.
‘For countries experiencing high inflation, this undoubtedly is a yet another disaster,’ he wrote.
The People’s Daily is the official newspaper of China’s ruling Communist Party. The overseas edition is a smaller circulation offshoot of the main paper.
Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent similar comments, amount to a quiet chorus of scepticism about Washington’s economic policies and global financial dominance.
Other countries should ‘avoid as far as possible footing the bill the for US bailout, while also joining hands to counter the financial crisis and actively promoting reform of the global financial and currency system that now maintains the hegemonic position of the US dollar,’ Mr Shi said.
The US bailout was merely an emergency measure that treated the symptoms, not the disease, he said. It was for America to pay its way out of a crisis brought about by its dereliction of oversight.
Mr Shi said there was a risk of a deep economic decline that would quickly spill over to Europe and Japan. In those circumstances, Asia would find it very hard to keep its footing.
Washington would be tempted to pay off old debt by issuing new debt, setting what Mr Shi called an odious precedent.
‘The US$700 billion bailout plan may drag the world into a new financial crisis,’ he said.
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