In China Talks, Paulson Sees Progress on Financial Markets
No Movement on Yuan Appreciation
By JASON LEOW IN XIANGHE, CHINA and JAMES T. AREDDY IN SHANGHAI
December 13, 2007 8:20 a.m.
U.S. Treasury Secretary Henry Paulson concluded two days of U.S-China economic talks, saying he had achieved commitments from the Chinese to widen their financial markets for foreigners, but acknowledging that he failed to get them to move on the issue of faster yuan appreciation.
Briefing reporters Thursday after the close of the Strategic Economic Dialogue, Mr. Paulson announced that China has agreed to let foreign companies doing business in China, including banks, raise money on its stock and bond markets, a long-anticipated move that could help them manage their cash flow and more quickly expand their sales.
For the past year, the Strategic Economic Dialogue has been Mr. Paulson's primary vehicle to open China's financial system, and in particular speed the appreciation of its currency. Those discussions have made limited progress, however, and some executives have complained at the slow pace at which China has implemented pledges it has made in the talks.
This week's meetings – which included sometimes testy dialogue – were largely overshadowed by agreements on product safety, energy and environmental protection.
Mr. Paulson said he feels that communications have attained a level of comfort that "makes it easier to deal with our conflicts and difficulties," the Treasury secretary told President Hu Jintao late Thursday, according to the official Xinhua news agency.
By issuing securities in China, foreign companies would be able to fund their expansion in China by tapping into one of the world's biggest pools of savings and some of its best-performing stock markets. The move may appeal to Beijing since it could help relieve upward pressure on the Chinese currency, by reducing the need for companies to bring money from overseas and therefore stemming the flow of foreign currency into China.
"Clearly [there is] demand for U.S. or foreign - any company doing business in China and investing in China - to be able to finance yourself in [Chinese currency]," Mr. Paulson told reporters. He said he was "sure" the rules will be put in place "gradually."
Beijing has signaled readiness to open its capital markets in other ways this week – albeit a gradual pace. As the talks were getting underway, the China Securities Regulatory Commission, which governs the stock market, said it would start accepting applications for Sino-foreign joint ventures in the securities business for the first time in two years, a move Beijing had promised after a previous meeting with Mr. Paulson in May. The statement followed news last weekend that Credit Suisse Group is proposing a joint venture securities business with Founder Group, a Beijing-based conglomerate, and that Morgan Stanley plans to team up with Shanghai-based China Fortune Securities Co. Both deals still require regulatory approval.
In recent days, the CSRC also announced it would triple to $30 billion the quota foreign institutional investors are collectively permitted to invest in yuan-denominated stocks and bonds, making good on another earlier pledge to Mr. Paulson in May. It will take time for those new funds to actually flow into the market.
While China is often rapped for curtailing foreign investors' access to its financial markets, it has opened opportunities for overseas issuers even less, which makes the pledge that foreign companies will be able to offer securities important.
Foreign companies can borrow money from Chinese banks but virtually the only fund raising in China's markets by foreign institutions has been from blue-chip international financial institutions, including the Asian Development Bank and World Bank's International Finance Corp. Those institutions, despite having channeled billions of dollars toward China, required years of lobbying Beijing before getting rights in 2005 to offer yuan-denominated debt known as "panda" bonds.
Beijing has long said it was considering fund-raising by foreign companies, and officials have in recent months suggested well-entrenched foreign companies and Sino-foreign joint ventures should ultimately be able to do so.
Yet, issuing stock and bonds in China remains a politicized process. And despite Thursday's comments, Beijing appears unlikely to allow a wave of initial public offerings or bond sales from foreign companies while there are still hundreds of domestic Chinese companies also hopeful of getting the regulatory nod to sell securities.
The ability to raise funds on China's capital markets could be especially useful for foreign banks, many of which have undergone costly restructurings in the past year to comply with Chinese regulations that require them to form standalone entities that are technically Chinese businesses.
If no concrete development appears in the next few months on the fund-raising issue, U.S. officials are likely to use the next round of the dialogue, which has been set for next June in Washington, to press the Chinese government.
Mr. Paulson and other U.S. officials made little headway on another key point in their agenda at the dialogue this week: persuading the Chinese to quicken the pace of its currency reform. Washington argues that Beijing's tight controls over its exchange rate keep the yuan artificially undervalued, giving its exports an unfair advantage on price.
China's incoming Commerce Minister Chen Deming said on Wednesday that Beijing isn't opposed to yuan appreciation in principle, but is against "excessive" revaluation. The country can't afford the instability that an overly rapid rise in the yuan will bring, he said.
Beijing also demonstrated no willingness to lift caps on foreign ownership in its financial firms, including banks, which some analysts had anticipated would be one of the key concerns of this week's meetings. "I've every confidence … that you'll see a lifting of moratoriums and expansion of the scope" of business in 2008, Mr. Paulson said. |
发表于 2007-12-13 23:21:03
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