WCA January 2008

Of related interest . . . In a distinctly capitalist accomplishment for a Communist country, China in 2007 superseded the United States in the number of publicly traded companies with market values higher than $200 billion, with eight of those companies among the 20 valued highest in world stock markets. The US had seven; Western Europe, four; Russia, one. Analysts note that many Chinese companies have profited from owning stakes in other companies whose stocks are soaring. And even if, as some believe, the Chinese market is now a bubble, there is no apparent reason why it should not continue to expand. Japan’s largest brokerage firm, Nomura Holdings, said 15 th October in Tokyo that it would pull out of the residential mortgage-backed securities market in the US and cut a quarter of its work force there. The move, which followed on the turmoil in the global mortgage market tied to defaults on sub-prime home loans extended by American lenders, will cost Nomura dear, pushing it to an estimated loss of $340- $511 million for the second quarter. Nomura is only one of the international investment banks to have suffered big losses on products tied to the American mortgage market. The Japanese company said it would now focus its efforts in the US toward expanding its asset management business and electronic brokerage unit Instinet. ❖ ❖ Pressure mounts on China to liberalise its currency policy US Treasury Secretary Henry M Paulson, Jr, together with other officials of industrialised nations, has for some time been quietly meeting with Chinese officials to urge that China permit the value of its yuan to float more freely against the US dollar and other world currencies. More forcefully than Mr Paulson, US congressional leaders have been threatening to enact trade barriers against China if the yuan is not allowed to rise. A higher-value yuan – and, conversely, a cheaper dollar and euro – would afford Chinese exporters less of an advantage over their American and European competitors. Accordingly, Chinese officials have been reluctant to abandon their policy of keeping the yuan trading within a narrow range relative to the dollar. One result of this policy is that China sells vastly more to the US and Europe than it buys from those markets. For 2007, economists estimate that China’s current account surplus, for goods and services, will be more than $400 billion. Writing in the Washington Post, Neil Irwin observed that neither Mr Paulson’s softer approach nor the lawmakers’ saber-rattling has had much effect on the Chinese leader- ship. China has loosened its grip on the yuan, but not by much; and not even the collective will of the Group of Seven major industrial nations has produced signs of greater exchange-rate flexibility on China’s part. The US and China

If the G-7 raises its voice higher, will it be heard in China?

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Wire & Cable ASIA – January/February 2008