Sunday, October 16, 2005
U.S. Offers Plan for Open Markets in China??
J'hallucine, as the French say when confronted by something too abnormal to be ignored.
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 U.S. is suggesting that the Chinese remove such constraints on foreign ownership of banks as not owning more than 25%, having $10 billion in assets, and having been in business five years or more. This is the same U.S. that prevented the Chinese from buying Unocal, that has had repeated financial scandals (including Refco, a financial institution, just last week).
The U.S. wants the Chinese to spend more and save less. Good idea? Not likely. First, they would probably not spend more for U.S. goods, but for energy and materials, driving world prices higher. Second, the U.S. needs their saving to finance the U.S. debt.
Let's just hope the Chinese keep a straight face; they really shouldn't get angry over such a ridiculous behavior.