Financial Services Industry Applauds Geithner Pick As Plus For China Dialogue
Wednesday, November 26, 2008 | Inside US-China Trade | Word Count (1163)
The selection of New York Federal Reserve Bank President Timothy Geithner as President-elect Barack Obama's Treasury Secretary-designate bodes well for U.S.-China relations because Geithner has lived in China, speaks Mandarin, and has had an "Asian focus" in his career, according to a senior financial services industry executive.
Geithner "has thoughtful views and understands the connectivity of the two economies," said Rob Nichols, the chairman of the Engage China Coalition and president and COO of the Financial Services Forum."His experience in Asia and knowledge, especially of China, will serve him well at the [Treasury] Department."
Obama's choice of Geithner also strengthens the argument for Treasury to retain leadership of any high-level bilateral dialogue the new administration holds with China, Nichols indicated.
"I personally think Geithner would be a perfect steward for the dialogue going forward," he said. Nichols said it is immaterial whether the senior bilateral forum between the U.S. and China is called the Strategic Economic Dialogue (SED), as it has been titled under the Bush administration, or another name.
He also noted that Geithner had spent part of his career (1985-88) at Kissinger and Associates, a consulting firm with many high-level Chinese and Asian connections. According to his New York Fed biography, Geithner graduated from Dartmouth College with a B.A. in government and Asian studies in 1983. He subsequently earned an M.A. in international economics from the Nitze School of Advanced International Studies at Johns Hopkins University in 1985, and "has studied Japanese and Chinese, and has lived in East Africa, India, Thailand, China, and Japan."
Nichols made his comments in a Nov. 24 press phone call during which he and several other members of the Engage China Coalition recounted the main"high-level take-aways" from a Nov. 17-21 trip to Beijing and Shanghai to meet Chinese financial services officials and regulators.
The trip was timed to take place several weeks in advance of the Dec. 3-5 SED in Beijing, which will be led by U.S. Treasury Secretary Henry Paulson and Chinese Vice Premier Wang Qishan.
Chinese regulators said they "viewed the SED as a positive" and "expressed a desire for it to continue," said Eva Mykolenko, assistant counsel of international affairs at the Investment Company Institute, who went on the trip.
Nichols said the Coalition had yet to receive a response from the Obama transition team to a letter it sent earlier this week urging the continuation of a high-level dialogue with China and calling for Obama to send a representative to monitor the Dec. 3-5 SED in Beijing.
According to Nichols, Chinese officials declined to preview the results of two soon-to-be-concluded studies on the impact of foreign investment in the banking and securities sectors.
China agreed to complete the studies by the end of 2008 following U.S. pressure last year and earlier this year at the Joint Commission on Commerce and Trade (JCCT) and the SED for more liberal limits on foreign participation in mergers and acquisitions in those two financial sectors.
Two major topics addressed with Chinese officials during the trip were the global financial turmoil and the political transition in the United States. According to Nichols and other trip participants, the common view expressed by Chinese officials toward the current financial crisis was that "we are all in this together."
The Chinese ministers and regulators made it clear they intend to continue their own reforms aimed at "modernizing and strengthening" Chinese financial infrastructure, including advancing capital market reforms, despite the crisis, Nichols said. "There was no skepticism surrounding our message" that it is in both countries' interests for China to continue on the reform path, he said.
According to Nichols, the Chinese economic officials probed the U.S. industry delegation about "how we got where we are and what the policy responses might be" from both the outgoing and incoming U.S. administrations. They also were very curious about the future of the U.S.-China economic relationship under an Obama administration, and clearly indicated they are monitoring the ongoing economic crisis, with a particular focus on "reduced demand for Chinese products" globally.
Chinese officials want, as part of their policy response to the crisis, to shift from the reliance on exports of manufactures to an economy that is more driven by domestic consumption, according to the financial executive.
This includes a desire to be "less reliant on external finance," Nichols said. The point the U.S. delegation underscored, he noted, was that the building up of a financial services marketplace in China can help in that regard. They also made clear that, as China continues modernizing its financial system, the United States will be likewise be negotiating and introducing "a new supervisory architecture" for its own financial sector, which the two countries' authorities and industries should discuss.
In addition to Nichols, the Engage China delegation included Financial Services Forum Executive Vice President for Policy John Dearie, American Council of Life Insurers Vice President of international Relations Brad Smith, Futures Industry Association Senior Advisor Nick Ronalds, Investment Company Institute Senior Counsel of International Affairs Susan Olson, and Mykolenko.
Brad Smith of the ACLI said the moratorium that the China Insurance Regulatory Commission (CIRC) in September put on the opening of new sales offices -- a major U.S. industry concern -- will be subject to new regulations that the CIRC will issue by the end of December.
He predicted that this issue, given its specificity, would not be raised at next week's SED, but is more likely to continue to be addressed in the JCCT's insurance regulatory dialogue. The next meeting of that bilateral dialogue, he said, is planned for some time in the first quarter of 2009.
Smith also noted that several Chinese agencies with which the group met touted China's recently announced $586 billion stimulus package and emphasized that it was targeted to help China's rural areas. He said China's insurance regulator told the group that the stimulus plan would, among other things, expand insurance coverage to China's rural poor. But he did not indicate how it would accomplish that goal, according to Smith.
During its five-day trip to Beijing and Shanghai, the Engage China Coalition delegation met with the following officials: Huang Guobo, Chief Economist, State Administration of Foreign Exchange (SAFE); Han Mingzhi, Director-General, International Department, China Banking Regulatory Commission (CBRC); Zhang Xin, Director-General, Financial Stability Bureau, People's Bank of China (PBOC); Jiang Bo, Deputy Director-General, International Department, China Insurance Regulatory Commission (CIRC); Tong Daochi, Director-General, International Affairs, China Securities Regulatory Commission (CSRC); Wang Hongbo, Deputy Director-General, American & Oceanic Affairs Department, Ministry of Commerce; Zhang Hao, Deputy Director-General, Ministry of Human Resources and Social Security (MOHRSS ); Dr. Jesse Wang, Vice President and Chief Research Officer, China Investment Corporation; Tu Guangshao, Deputy Mayor, Shanghai; Dr. James Liu, Executive Vice President, Shanghai Stock Exchange; and Dr. Fang Xing-Hai, Director-General, Shanghai Metropolitan Government Financial Service Office. -- Scott Otteman