Wednesday, Oct 8, 2008
BEIJING: The “tsunami” in the US financial system was touched off by short-sighted monetary policy and lax regulation, a leading Chinese state newspaper said on Wednesday. The front-page commentary in the overseas edition of the People’s Daily is the latest in a stream of critical articles that have lashed US policy even as the Chinese central bank has said it endorses a Washington bailout plan.
“Throughout the sub-prime crisis, each step appears to have been reasonable and proper, but in fact each one was expanding and accumulating risks,” said the commentary by Yi Xianrong, an economist at the Chinese Academy of Social Sciences, a leading government think-tank.
The People’s Daily is the ruling Communist Party’s official paper, and the overseas edition is a small offshoot of the main domestic edition. Its commentaries do not necessarily directly reflect leadership positions. But this commentary and previous ones have reflected dismay with US economic policy and debate over how China should respond to Washington’s financial straits.
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“Due to the government’s short-sightedness or short-term behaviour, there was no formulation of monetary policy from a long-term strategic perspective,” Yi wrote. “At the same time, government departments were seriously remiss in oversight and management of financial innovations.” The commentary offered no prescriptions for how Beijing should respond to the global crisis.
But it stressed the dangers of venturing into derivatives and other complex financial products that many have blamed for the turmoil. In another official newspaper, however, Yao Zhizhong, an economist at the Chinese Academy of Social Sciences, said Beijing should put some of his financial muscle behind the US bailout. If China and others with big foreign exchange reserves do not help, Washington may resort to dangerously inflationary monetary policy, Yao told the Chinese-language International Finance News, which is also run by the People’s Daily.
“China will certainly sustain losses from this financial crisis, and now we have to think up ways of lowering those losses,” he said. China might not necessarily support the bailout using its foreign exchange reserves to buy US bonds, he said. China could “along with other countries, provide various kinds of cooperation for US financial interventions”, he added.
This article was posted: Wednesday, October 8, 2008 at 11:07 am