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December 2008

China shuns Paulson’s free market — As US Treasury Secretary Plans $ 700-B Bailout

By Raman Jokhakar, Tarunkumar Singhal, Chartered Accountants
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21. China shuns Paulson’s free market — As US Treasury Secretary
Plans $ 700-B Bailout


Eighteen months ago, US Treasury Secretary Henry Paulson told
an audience at the Shanghai Futures Exchange that China risked trillions of
dollars in lost economic potential unless it freed up its capital markets.

An open, competitive, and liberalised financial market can
effectively allocate scarce resources in a manner that promotes stability and
prosperity far better than governmental intervention,” Paulson said.

That advice rings hollow in China as Paulson plans a
$ 700-billlion rescue for US financial institutions and the Securities and
Exchange Commission bans short sales of Insurers, banks and securities firms.
Regulators in the fastest-growing major economy say they may ditch plans to
introduce derivatives, and some company bosses are rethinking US business
models.

“The US financial system was regarded as a model, and we
tried our best to copy whatever we could,” said Yu Yongding, a former adviser to
China’s central bank. “Suddenly we find our teacher is not that excellent, so
the next time when we’re designing our financial system we will use our own mind
more.”

(Source : The Economic Times, 25-9-2008)

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