US Financial Crisis/Bailout, China's Role

China's Wen swipes at US debt binge
Wed Jan 28, 2009 12:45pm EST
By Jason Subler


DAVOS, Switzerland (Reuters) - China's Premier Wen Jiabao blamed the United States' debt-financed spending binge and blind pursuit of profit for the global financial crisis in a speech at the World Economic Forum on Wednesday.

"Inappropriate macroeconomic policies in some economies and their unsustainable model of development, characterized by prolonged low savings and high consumption," was first in a list of reasons Wen cited for the crisis.

This was a clear reference to the United States, which has a savings rate below zero and relies heavily upon Chinese buying of U.S. debt to finance its huge current account deficit of 4.8 percent of GDP and growing.

But Wen chose not to address directly a brewing row over the value of its currency -- an issue closely tied to U.S. debt issuance.

The new U.S. Treasury Secretary Timothy Geithner last week surprised China by branding it a currency manipulator for depressing the value of the yuan to support its exports. Geithner was joined by the International Monetary Fund, which said the Chinese yuan was undervalued.

This disappointed Beijing since the previous administration avoided the term for years, aware of U.S. dependence on China to buy its debt, and instead pursued dialogue.

In his speech, Wen also listed excessive expansion of financial institutions in the "blind pursuit of profit," the failure of regulation, lack of discipline by ratings agencies, and the spread of derivatives for the financial turmoil that has sent major economies tumbling into recession.

To tackle the crisis, Wen threw his weight behind efforts in the Group of 20 major economies to reform the financial system by tightening regulation and oversight. In particular, Wen supported strengthening the supervision of major reserve countries, a role given to the IMF but never effectively utilized.

Wen travels to Berlin to meet with German Chancellor Angela Merkel on Thursday as part of an European tour to discuss cooperation in solving the financial crisis.

MEASURED OPTIMISM ON CHINA

On the outlook for China, Wen struck a tone of measured optimism. He said there were early signs that the economy may have started to turn around in late November. He pointed to a marked increase in lending and activity at ports.

"To be honest, it will be a tall order to achieve a growth rate of 8 percent in 2009, but I still retain the conviction that we will achieve this," Wen told business and political leaders in his keynote speech at the four-day gathering.

China, the world's third-largest economy, has slowed much more abruptly than expected in the face of the financial crisis, as wilting U.S. and European demand have slammed the country's export sector.

Annual economic growth slowed to 6.8 percent in the fourth quarter of 2008, from 13 percent in all of 2007. The 9 percent pace for 2008 was the slowest in seven years; growth slowed despite five interest rate cuts in the second half of the year.

That has muted hopes that China could help pull the global economy out of the current slowdown.
For full coverage, blogs and TV from Davos go to
(Additional reporting by Emma Thomasson and Stella Dawson; writing by Stella Dawson; Editing by Richard Hubbard)

I thought her full thesis might be worth a read if one can get hold of it. Also as she is part of the Obama team, its always handy to get a profile on what makes them tick, anyway with this cultural connection thingy i just wonder if its just a way of convincing themelves of anglo saxon superiority, in a academic manner

I notice Obamas stimulus plans have drawn mixed reviews, even over here in NZ talkback radio consisting of various levels of expertise in things, American , have their doubts.

I was looking at the package and basically there is a lot of handouts in there, like $500 dollars for singles, $1000 for couples. That isn't much different from the 300 billion stimulus package that was passed in the late spring of 2008, which also did nothing in stopping the economic crisis months later.

America has certainly changed since I was a mere padawan. There was a time it had a unity in purpose between its economic and foreign policies. The way to make more money is to look, develop and exploit new markets for American products. The IMF, the World Bank had all been means to develop new markets in the Third World, remove trade barriers, so you can sell US made products in them whether its infrastructure, like building power plants or just selling consumer products. When China first opened to the world, American businesses rushed in, not to exploit the cheap labor, but to harness and exploit the possibilities of a vast market. This is in the spirit of Admiral Dewey, who sailed to Tokyo harbor and opened up Japan and its markets to the US and also in effect, opened Japan to the world. If this package is what it is, then this spirit is no more.

Expert: China economy to witness robust rebound in 2010
2009-01-30 12:43:02 Print

Special Report: Global Financial Crisis

Backgrounder: World Economic Forum

DAVOS, Switzerland, Jan. 29 (Xinhua) -- China's economy is to witness a robust rebound in 2010, with its GDP growth topping 8 percent, said Stephen S. Roach, chairman of Morgan Stanley Asia Limited, in an exclusive interview with Xinhua on Thursday.

He predicted that in the first half of this year, China's GDP (gross domestic products) growth would be below 8 percent, but China's economy was expected to pick up in the second half.

That is because China has been tied closely with the global economy and does not get special relief from the global shock, he explained.

The main driving force of China's rapid GDP growth in recent years is export, but now China's export is sliding, Roach said.

Even though Chinese companies are improving their positions and maintaining their competitiveness, there is nothing they could do to stimulate the demand of such countries as the United States, European countries and Japan, he said.

So it is the negative foreign environment that has impacted China's GDP growth, he added.

Roach believes that this year is the worst year for the global economy since the end of the Second World War, but China's economy will be much better than those of many other countries in the world.

In addition to increasing spending on infrastructure, he suggested that China expand dramatically investment in social security, pensions, unemployment insurance and health care.

In his view, the most important thing for China to do now is to focus on domestic consumers.

As of banking bailout plans taken by many governments, he said China's banking system was in a better shape, because the banks did not invest a lot in illiquid assets and subprime mortgage.

Chinese banks, however, still face challenges because of the business cycle, he warned.

i dont understand where obama is really going with his economic plans. wasnt it the american's spending habits that induced the crisis in the first place? so how do they expect to do exactly what they have been doing and solve that problem? i understand that they need the stimulus package to "stimulate" the economy but dont they need something else to go along with it like an overhaul of the country's financial sector. throwing in $800bn alone is like bush going into iraq without an exit strategy.

WEF 2009: Global crisis 'has destroyed 40pc of world wealth'
The past five quarters have seen 40pc of the world's wealth destroyed and business leaders expect the global economic crisis can only get worse.


By Edmund Conway in Davos
Last Updated: 5:42AM GMT 29 Jan 2009

Steve Schwarzman, chairman of private equity giant Blackstone, said an "almost incomprehensible" amount of cash had evaporated since the financial crisis took hold. Photo: Bloomberg

Steve Schwarzman, chairman of private equity giant Blackstone, said an "almost incomprehensible" amount of cash had evaporated since the financial crisis took hold.

"Business will be very different," he added.

His comments came on a day of the World Economic Forum characterised by the gloom of its participants and warnings that the crisis will endure for some time. News Corp chief executive Rupert Murdoch kicked off the meetings by warning that the atmosphere was worsening – despite global economic confidence plumbing the lowest depths on record.

"The crisis is getting worse," he said. "It's going to take drastic action to turn it around, if it can be turned around, quickly. I believe it will take a long time."

Executives participating in an economic brainstorming session said that despite the trauma caused by the economic and financial problems, another crisis at some point in the future was inevitable.

Sir Howard Davies, director of the London School of Economics and a former Bank of England policymaker said: "The outlook is pretty grim. Things are not good and business surveys are coming out showing they're getting even worse.

Well, that 40 percent loss would not have happened if much of the previous boom was not based on a series of bubbles, so it is really just a correction to the true value induced by the tech bubble collapse and 9/11, hidden by the machinations of Wall street and its politicians.

Chinese citizens are helping US economy to recover.

:china::china::china:

Chinese gear up to buy U.S. homes
Source: Xinhua | 02-01-2009 10:21
Special Report: Global Financial Crisis

BEIJING, Feb. 1 (Xinhua) -- Attracted by the real estate plunge on the other side of the globe, Chinese homebuyers are gearing up for visits to the United States in February to buy cheap homes, the English language newspaper China Daily reported in its weekend issue.

A pioneering house-buying team of 20 to 30 people, organized by Soufun.com, one of the largest real estate portals in China, is scheduled to leave for the United States on Feb. 12, according to an article on Soufun.com.

It is said more than 300 Chinese have registered so far on the website for a 10-day house-buying trip.

The U.S. mortgage crisis and the downturn in the global economy have presented people with a golden opportunity, said Liu Jian, an official of the Beijing-based real estate portal.

The trip, which costs up to 25,000 yuan (3,500 U.S. dollars) per person, will focus on cities with huge ethnic Chinese populations including San Francisco, Los Angeles, Las Vegas and New York, Liu said.

The prices of houses targeted by Chinese buyers are between 3 million to 5 million yuan (400,000 to 700,000 U.S. dollars), he said.

The applicants include real estate professionals who want to investigate in the U.S. real estate market, and parents who want to buy houses for their children studying or to study in the United States.


Editor:Liu Anqi