Luo Ping, a director-general at the China Banking Regulatory Commission, said after a speech in New York on Wednesday that China would continue to buy Treasuries in spite of its misgivings about US finances.
“Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”
Mr Luo, whose English tends toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”
You gotta love this guy! Obviously the out of control spending is impacting the dollar but in a positive loop buying USD denominated treasuries will prop up the USD. The good news is that they say they will continue buying treasuries. I have this theory that China's own Keynesian stimulus involves buying US Treasuries, even though they know they will be under water. They don't need a Geithner, they just need to draft on ours.
However, Mr Luo said Chinese officials would encourage its banks to finance domestic mergers and acquisitions rather than provide rescue finance to distressed financial companies in other countries: “There will be no bottom-fishing of financial institutions, particularly in the US, because there is a lot of uncertainty about the quality of the books.”
Hmmm , that is the real middle finger if you ask me. 1/ They will not help float the banks through equity. They probably got so burned by their private equity sovereign investments they are going to stick to UST for a while. 2/ A bit of a lesson saying they the US doesn't have the balls to do what it takes and merge banks, instead trying to keep zombie banks alive, Japan style, because you know, political cojones don't come cheap.
“To some extent, Glass-Steagall has fuelled the crisis,” Mr Luo said. “The separation of commercial and investment banking is likely to stay longer [in China] than before.” Like senior financial officials in other developing nations – such as Mohammad Al Jasser, vice-governor of the Saudi Arabian Monetary Agency – Mr Luo also spoke out against what he called America’s laissez-faire capitalism.
“Government ownership was viewed as something negative but the pendulum is swinging the other way. Perhaps banking is [no different from] public utilities where government participation is necessary,” he said.
“Deregulation in the US has gone a little bit too far. The market can’t be omnipotent.”
What? Banks are public utilities?!?! Markets can fail?!?!? HERESY!!! SHOCKING!! SHOCKING!!!
Good laugh this morning, Mr Luo: remember we love you!