29 / 131
Wire & Cable ASIA – September/October 2008
27
The US and China
The Chinese are very decidedly
displeased with America’s subprime
mortgage crisis
“The United States and China don’t always agree on
economic issues,” Treasury Secretary Henry M Paulson Jnr
said in prepared remarks, 17
th
June at the United States
Naval Academy, in Annapolis, Maryland. “Sometimes we
may even disagree quite strongly. But we keep talking.”
The occasion was the opening of two days of intensive
economic talks between the US and China on a range of
thorny issues, notably trade and investment. Mr Paulson’s
depiction of the two countries as earnest seekers after
harmony was another rendition of the US mantra that,
despite tensions, ties between the two countries are
“growing in a positive direction.”
Going in, there were some encouraging signs. Since
mid-2005, China has allowed its currency, the Yuan,
to appreciate nearly 20%, satisfying in some degree a
longstanding US demand. And the “strategic economic
dialogue” between the two countries, known as the SED,
has been judged at least a qualified success, having
prompted China to institute limited reforms in its economy
and to take limited steps toward the opening of its huge
market to American goods and investment.
Alas, Mr Paulson’s grace note faded rather quickly before
some crisp remarks from the Chinese side on the lessons
of the current global financial crisis. Damning with faint
praise, Zhou Xiaochuan, minister of the Peoples Bank of
China, the central bank, said he was impressed that many
shaky American financial companies had increased their
capitalisation in recent months, as both Mr Paulson and
Ben S Bernanke, chairman of the Federal Reserve, had
urged on them. Mr Zhou said pointedly that this was the first
time since the last such meeting in 2006 that China needed
to learn from America’s mistakes as well as its successes.
Mr Zhou also said that the session featuring a presentation
by Mr Bernanke was “something we have never experienced
before,” in that discussion centred on the “inadequacy
of [US] regulations” governing subprime mortgages and
other complex financial products. For its part, the American
team at Annapolis asserted that it would be wrong for
China to use the subprime mortgage crisis in the US as
an excuse to slow deregulation of its own financial markets
or to modulate its already measured welcome to foreign
investment.
Alan F Holmer, special envoy for China under Secretary
Paulson, led the American side in the talks. He
acknowledged that there were “lessons to be learned
from the economic developments in the US,” but he
also cautioned about “significant costs to China if they
were to slow down with respect to their financial sector
liberalisation.”
Mr Zhou also charged that the declining value of the
US dollar in relation to other currencies, including the Yuan,
was contributing to rising prices for oil, food, and other
Statue of Liberty Image from BigStockPhoto.com
Photographer: Marty