Financial Crisis Impact Could Worsen: Wen

Source : The Business Times, September 25, 2008

UNITED NATIONS - Cash-rich China weighed in on the US financial crisis on Wednesday, with Premier Wen Jiabao warning that its international impact could become 'more serious' and stressing the need for concerted efforts to contain the turmoil.

He indicated that China, the world's biggest holder of foreign reserves and second biggest holder of US treasury bills, was ready to help in an international bid to defuse the turmoil that has rocked financial markets across the globe.

'The ongoing financial volatility, in particular, has affected many countries and its impact is likely to become more serious,' Mr Wen told the UN General Assembly.

'To tackle the challenge, we must all make concerted efforts,' Mr Wen told the UN meeting at the tail end of his address, which touched on various issues, including a pledge to push ahead with reforms to fuel growth in the world's most populous nations.

US President George W. Bush, who is also attending the UN General Assembly, had telephoned Chinese President Hu Jintao on Monday to brief him about the financial turmoil and his administration's bid to stage a US$700 billion Wall Street bailout to stem the crisis.

Mr Hu told Mr Bush that China welcomed Washington's efforts to stabilise the US financial markets and hoped they succeed, according to Beijing's state media.

But as Mr Wen spoke on Wednesday at the United Nations, the Bush administration remained locked in a dispute with the US Congress over the massive bailout package aimed at buying distressed mortgages and mortgage-related securities from financial institutions.

Financial markets, including in China, have been volatile since the US crisis peaked this month, triggered by the bankruptcy of Lehman Brothers and a Federal Reserve rescue of insurance and financial giant AIG last week.

Mr Wen hinted that China would help in any international bid to defuse financial contagion arising from the US crisis, saying this was not the time for 'hostility' or 'prejudice'.

'So long as people of all countries, especially their leaders, can do away with hostility, estrangement and prejudice, treat each other with sincerity and an open mind, and forge ahead hand in hand, mankind will overcome all difficulties and embrace a brighter and better future,' he said.

'China, as a responsible major developing country, is ready to work with other members of the international community to strengthen cooperation, share opportunities, meet challenges and contribute to the harmonious and sustainable development of the world,' he said.

China has emerged as the world's largest and fastest growing holder of foreign exchange reserves, which totalled US$1.8 trillion as of June 2008, according to its central bank.

It has invested a large share of its reserves in US securities, which include Treasury debt, US agency debt, US corporate debt and US equities.

A Congressional Research Service report in January said China may be holding nearly US$700 billion in US securities as of June 2006, making it the second largest foreign holder of American securities after Japan.

Mr Wen said given the global nature of issues threatening the world, including environmental problems, terrorism, diseases, natural disasters and financial troubles, 'no county can expect to stay away from the difficulties or handle the problems all by itself'.

The premier also touched on global concerns about China's direction after hosting the Olympics last month, saying Beijing would remain committed to 'peaceful development' and 'unswervingly pursue reform and opening-up.'

He said 'only continued economic and political restructuring, and reform in other fields can lead to sustained economic growth and social progress, and only continued opening up in an all-round way can lead the country to greater national strength and prosperity.' -- AFP