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| Wen Voices Concern Over China's U.S. Treasurys |
| 2009-03-13 |
| BEIJING -- Premier Wen Jiabao voiced confidence in China's economy, saying his government's finances give it room to spend even more to support growth if needed, but expressed concern about the outlook for the U.S. and the safety of its Treasury bonds. Uh Oh. That pesky bond market. Someone is noticing. The forceful comments from Mr. Wen's annual press conference -- a rare opportunity for domestic and foreign reporters to ask a top Chinese official questions directly -- helped depress the U.S. dollar and prices of U.S. Treasurys in Asian trading Friday. Premier Wen Jiabao, at his annual press conference marking the close of China's legislative session, spoke forcefully about the effect of China's policies on the global economy. The public airing of his concerns reflect how the relationship between China and the U.S. has been evolving under the pressure of the financial crisis. For years the U.S. has pressed China to change the way it runs its economy, such as by opening up its financial system. But in the last year China's government has been increasingly vocal about what it sees as U.S. economic mismanagement. And as the U.S. government's largest creditor, it has become more assertive in trying to ensure its interests receive a hearing. When the bank calls you up and says you need to behave better if you still want your line of credit, what do you do [assuming you are sensible - sorry scratch that] "We have lent a huge amount of money to the U.S., so of course we are concerned about the safety of our assets. Frankly speaking, I do have some worries," Mr. Wen said in response to a question. He did not offer specific suggestions on economic policy to the U.S. government, but called on it to "maintain its credibility, honor its commitments and guarantee the security of Chinese assets." "guarantee the security of Chinese assets" = stop jeopardizing the US$ by spending too much on silly projects which don't constitute legitimate immediate stimulus i.e. if the plumbing and electrical system need fixing, don't just spend on a coat of paint and a new jacuzzi Mr. Wen did indicate that China would not be rash in making changes to its $1.946 trillion stockpile of foreign reserves, much of which is in U.S. dollars. While China is naturally looking out for its own interests, it will "at the same time also take international financial stability into consideration, because the two are inter-related," he said. In that vein, Mr. Wen also pointed out that China hasn't pushed down the value of the yuan, despite pressure on its exporters, and repeated his government's commitment to currency stability. The yuan has hovered around 6.84 to the dollar since July 2008, but Mr. Wen noted that because the dollar has risen against other Asian and European currencies, the yuan has actually become stronger overall. He said China alone would decide where the yuan goes from here. "No country can pressure us to appreciate or depreciate" the currency, he said. Despite the rising external challenges, Mr. Wen reaffirmed his belief that China should be able meet its traditional target of economic growth of around 8% this year. He said market expectations last week of another stimulus package were based on "rumors and misunderstandings," and that China's announced program of four trillion yuan in investments over two years will help meet "both short-term and long-term needs." China's government is planning on an eightfold expansion of its budget deficit this year, to around 3% of gross domestic product, to fund the stimulus program. Mr. Wen said government debt remained at a manageable level and that conservative budgeting in previous years means China is well positioned to do more if necessary. "We have already prepared plans to deal with greater difficulties, and have reserved adequate ammunition. We can introduce new stimulus policies at any time," he said. Mr. Wen said that China is also closely watching to see the effects of the policies taken by U.S. President Barack Obama aimed at returning the world's largest economy to health. Chinese foreign minister Yang Jiechi was also in Washington this week to discuss how the two countries can cooperate on economic policy, among other issues. A test of that cooperation is quickly approaching. U.S. Treasury Secretary Timothy Geithner this week called on the Group of 20 -- a gathering of the world's largest developed and developing economies -- to increase funding for the International Monetary Fund by up to $500 billion to help combat the financial crisis. Achieving that sum likely will depend on getting agreement from countries that hold large foreign exchange reserves, such as China and Saudi Arabia. How the balance has changed Ahead of a preparatory meeting of G-20 financial officials this weekend near London, Mr. Wen said pointedly that "increased funding for the IMF is not a question for just one country" but for all member nations. He also repeated China's desire to see reforms to the IMF that give more clout to developing nations. The Chinese premier's annual press conference is held each March at the close of the country's legislative session. Mr. Wen was asked about a broad range of subjects, from relations with France and Russia to the possibility of political reform in China and the sensitive issue of Tibet. Mr. Wen used harsh language against the Dalai Lama, Tibet's spiritual leader, who accused the Chinese government this week of turning the Himalayan region into a "hell on earth." He said talks between Beijing and the Dalai Lama, which took place last year without making any progress, could only resume if the Dalai Lama is "sincere." Despite blanket security in Tibet around the 50th anniversary of the Dalai Lama's flight from Tibet, Mr. Wen said that "the situation in Tibet on the whole is stable. The Tibetan people hope to live and work in peace and stability." So China is now playing the adult/banker lecturing the child/borrower about better behaviour. How the balance has shifted. It is a sad day when the US stock market get's more of a bump from a chinese rumored stimulus than all the nonsense coming out of the US administration. That is outsourcing reasonable economic stimulus. |
| Posted by:Omoter Speaking for Boskone7794 |
| #8 So, what would happen if the Chicoms refused us anymore credit? Or the entire world fort that matter? We'd stop buying their goods. We'd build factories in the US, exploit our own resources and employ our own workers. |
| Posted by: ed 2009-03-13 15:10 |
| #7 We'd have to stop buying crap that depreciates faster than a 30 yr. US T-bill. Yeah, and there are those of use who would like that. But the question then becomes, What if they decide it's worth the risk? I mean, it's not as if these are benevolent people who are really all that concerned about "international financial stability" if they thought they could take advantage of the instability. These are the kind of people who would sacrifice millions of their own people if they think it will enhance their power. I just wonder if there is anybody in our government who is wondering the same things. Or are they all more concerned about getting a second, third or fourth mortgage so they can "buy more stuff"? |
| Posted by: Ebbang Uluque6305 2009-03-13 14:20 |
| #6 So, what would happen if the Chicoms refused us anymore credit? We'd have to stop buying crap that depreciates faster than a 30 yr. US T-bill. |
| Posted by: .5MT 2009-03-13 13:52 |
| #5 So, what would happen if the Chicoms refused us anymore credit? "War Bonds" sold directly to the population. Guess how well they'd sale too? /rhetorical question. Liberal charity is spending other peoples money by government appropriations, not their own. I doubt all those 'high rollers' who funded the election would be so willing to volunteer their assets to such a 'bond' drive at the level required to fund a trillion dollars worth of |
| Posted by: Procopius2k 2009-03-13 12:43 |
| #4 The fact we need to borrow money from one of our ... um... well enemies might be too harsh a word but... how about a aggressive regional competitor, to fund our corruption part is just sad and self destructive. |
| Posted by: DarthVader 2009-03-13 12:04 |
| #3 If I recall correctly, during the last days of the Soviet Union, they came to the United States looking for a loan. Reagan refused and the Soviet Union subsequently collapsed. So, what would happen if the Chicoms refused us anymore credit? |
| Posted by: Ebbang Uluque6305 2009-03-13 12:02 |
| #2 The stock markets "bump" is better termed a "pump-and-dump" |
| Posted by: Anguper Hupomosing9418 2009-03-13 11:57 |
| #1 A great paranoid fantasy that came out about this a week ago was that Obama was willing to offer huge tracts of US federal lands to the Chinese as collateral that the US would not default on its T-bills. |
| Posted by: Anonymoose 2009-03-13 10:36 |