China has just had a couple of bad
centuries - and now it's back.
- Hong Kong wisecrack
NY Times article below (above quote from elsewhere)
Here's what the U.S. is proposing to China :
XIANGHE, China , Oct. 15 - The Bush administration is expected
to present China's political leaders on Sunday with a sweeping
plan to overhaul China's financial markets and open the
country to foreign banks, investment firms and insurance
companies.
... "What we tried to do is take a quantum leap in sophistication
and scope," said Timothy D. Adams, undersecretary for
international affairs at the Treasury Department. "It gives
you a picture of the truly complex nature of what we are
trying to do."
Personally, I find this ludicrous. The U.S. is basically
asking China to surrender its economic sovereignty. Even a
rudimentary understanding of Chinese geopolitical behavior
indicates that China is far too shrewd and ambitious to have
any interest in such a proposal. The Treasury Department
seems to be out of touch with reality.
As the NY Times points out:
China's state-owned banks and far-flung rural credit
cooperatives have many defenders in the ruling Communist
party, and they are certain to oppose well-financed
competition from Western banks.
.... Even without opposition from vested interests, many Chinese
leaders are likely to fret over giving more freedom to foreign
financial institutions to enter Chinese markets.
.... Under current laws, foreign investors are usually prohibited
from owning more than 25 percent of a commercial bank, and no
single foreign investor can own more than 20 percent.
The Chinese symbol for China denotes literally "Central Country".
China is the oldest continuous civilization in the world, or we
might say the longest-running empire, if we permit occasional
disruptions.
Top Chinese leaders, both political and military, identify with China's
long history and they have made it clear they intend to be a world power,
and that it is their 'rightful role' to dominate affairs in Asia. They have
already made significant progress toward building a system of alliances
and cooperative agreements, leading toward a regional economic block
dominated by China.
China plays a deep game, and I imagine they'll listen respectfully to
these American proposals, nod in agreement with many points, and
then respond with a token gesture, along the lines of their recent
currency revaluation.
we'll see,
rkm
--------------------------------------------------------
http://www.nytimes.com/2005/10/16/business/16china.html
October 16, 2005
U.S. Offers Plan for Open Markets in China
By EDMUND L. ANDREWS
XIANGHE, China , Oct. 15 - The Bush administration is expected
to present China's political leaders on Sunday with a sweeping
plan to overhaul China's financial markets and open the
country to foreign banks, investment firms and insurance
companies.
Administration officials say the plan is part of an effort to
put the yuan into a broader debate over China's lopsided
reliance on exports as the main source of economic growth.
The plan, to be discussed in two days of talks here and in
Beijing, calls for China to speed up the privatization of
state-owned companies, including banks; to develop a
Chicago-style futures market for currency trading; to
establish an independent credit-rating agency; and to crack
down on bailouts for banks left holding bad loans.
"What we tried to do is take a quantum leap in sophistication
and scope," said Timothy D. Adams, undersecretary for
international affairs at the Treasury Department. "It gives
you a picture of the truly complex nature of what we are
trying to do."
Though many of the ideas are familiar, and often supported by
Chinese leaders in principle, the list reflects an increased
effort to lecture China about internal financial issues.
That could backfire. Chinese leaders invariably bristle at
pressure from American officials, and they could view the new
American "priorities" as an unwelcome intrusion.
The new tack comes as Treasury Secretary John W. Snow
continues to show little progress on the volatile economic
dispute with China over exchange rates.
Republican and Democratic lawmakers in Congress have long
complained that the yuan has been pegged at an artificially
low value against the dollar, making Chinese exports to the
United States cheaper than they would otherwise be.
China announced a 2 percent revaluation in July, but have yet
to follow with any additional changes. Based on signals from
senior Chinese officials on Friday and Saturday, Mr. Snow is
unlikely to return to Washington next week with any evidence
of new progress.
Mr. Snow has been arguing that China needs to get people to
spend more and save less. Administration officials say that a
financial overhaul would help make that happen.
Many economists agree with that assessment, but they caution
that there are limits to what the United States can do to
speed up change.
"They are doing a smart thing, because the exchange rate is a
small part of the overall economic relationship," said Andrew
Rothman, a Shanghai-based strategist at CLSA Asia-Pacific, a
brokerage firm. But he added, "This is not the kind of thing
where someone flips a switch and it happens overnight."
Mr. Rothman said that China had already embraced many of the
ideas that Mr. Snow was promoting and that consumer spending
has grown sharply in the past few years.
Retail sales in China have been climbing about 10 percent a
year for the past several years, he said. Household credit,
virtually nonexistent five years ago, now accounts for 16
percent of all outstanding credit.
But many of the Bush administration's proposals would
encounter fierce political opposition from many quarters.
China's state-owned banks and far-flung rural credit
cooperatives have many defenders in the ruling Communist
party, and they are certain to oppose well-financed
competition from Western banks.
Even without opposition from vested interests, many Chinese
leaders are likely to fret over giving more freedom to foreign
financial institutions to enter Chinese markets.
Under current laws, foreign investors are usually prohibited
from owning more than 25 percent of a commercial bank, and no
single foreign investor can own more than 20 percent.
According to a document that Treasury officials plan to
circulate among Chinese leaders, the Bush administration would
remove the limits on foreign ownership as well as a host of
other restricitons.
Foreign financial institutions that want to buy Chinese
securities would be freed from having to have at least $10
billion in assets and to have been in business at least five
years.
Foreign-affiliated banks, brokerage firms and insurers would
be freed from restrictions on setting up multiple branches at
one time.
Copyright 2005 The New York Times Company
--
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