.Chinese regulator says US lending was 'ridiculous'
TIANJIN, China (AP) - U.S. lending standards before the global credit crisis were "ridiculous" and the world can learn from China's more cautious system as it considers financial reforms, the top Chinese bank regulator said Saturday at an economic forum.
The global financial crisis was a hot topic at the World Economic Forum - the Chinese leg of the forum based in Davos, Switzerland. Despite the global turmoil, China's Premier Wen Jiabao said China still has "huge potential for growth" because of its large labor pool, vast domestic market and the improved competitiveness of its companies.
Wen gave no growth forecast. But China's bank regulator said the annual growth rate should fall from last year's 11.9 percent to between 9 percent and 9.5 percent.
Liu Mingkang, chairman of the Chinese Banking Regulatory Commission, said his country's prudent approach to banking had enabled the country to avoid the credit crunch so far.
Beijing curbed mortgage lending in 2003 and 2006 to keep debt manageable amid a real estate boom, while American regulators responded to a similar situation by letting credit grow, Liu said.
"When U.S. regulators were reducing the down payment to zero, or they created so-called 'reverse mortgages,' we thought that was ridiculous," Liu said at a World Economic Forum conference in the eastern Chinese city of Tianjin.
He said debt in the United States and elsewhere rose to "dangerous and indefensible" levels.
Liu's comments were unusually pointed criticism of U.S. financial regulation for a Chinese official. They added to suggestions by countries that are under U.S. pressure to liberalize their financial markets that Washington's model might not be ideal.
China has based its reforms on the U.S. system but has moved gradually. It has kept its financial markets isolated from global capital flows, prompting complaints by its trading partners.
As China made changes, "a lot of the time, we learned that what we had learned from our teacher the day before was wrong," Liu said, referring to the U.S.
China's state-owned banks have avoided the turmoil roiling Western markets. Chinese banks hold bonds from failed Wall Street house Lehman Brothers, but they are a tiny fraction of their vast assets.
Liu called for governments to create international standards and regulatory systems for globalized financial markets. He said Beijing has signed information-exchange agreements on financial regulation with 32 other countries since the turmoil began.
Liu pointed to China's experience with real estate and the collapse of a stock market boom.
As stock prices in China soared, banks were ordered to make sure customers were not using loans or credit cards to finance speculation. As a result, Liu said banks have suffered no rise in loan defaults even though stock prices have plummeted 63 percent since the October 2007 peak.
"We Chinese can share our own experiences with all the market practitioners," Liu said. "Maybe our experience cannot be applicable to developed markets fully. But still, I think it might be useful and helpful to those in emerging markets."
Chinese and foreign businesspeople at the forum said the credit crisis is likely to increase the influence of China and other emerging economies in the world financial system, though Wall Street will retain its leading role.
The crisis is also likely to reduce resistance in the West to investments by government funds as companies urgently seek capital, said Thomas Enders, CEO of the European aircraft producer Airbus Industrie.
However, European Union trade commissioner Peter Mandelson defended the global capital markets structure, warning that drastic change might hurt prosperity.
"The capital market system, fundamentally, is not flawed," Mandelson said. "We are not looking for some alternative, and I hope that people in the emerging markets, in China for example, are not looking for an alternative to properly functioning capital markets."
MyWay
The one home policy
The global financial crisis was a hot topic at the World Economic Forum - the Chinese leg of the forum based in Davos, Switzerland. Despite the global turmoil, China's Premier Wen Jiabao said China still has "huge potential for growth" because of its large labor pool, vast domestic market and the improved competitiveness of its companies.
Wen gave no growth forecast. But China's bank regulator said the annual growth rate should fall from last year's 11.9 percent to between 9 percent and 9.5 percent.
Liu Mingkang, chairman of the Chinese Banking Regulatory Commission, said his country's prudent approach to banking had enabled the country to avoid the credit crunch so far.
Beijing curbed mortgage lending in 2003 and 2006 to keep debt manageable amid a real estate boom, while American regulators responded to a similar situation by letting credit grow, Liu said.
"When U.S. regulators were reducing the down payment to zero, or they created so-called 'reverse mortgages,' we thought that was ridiculous," Liu said at a World Economic Forum conference in the eastern Chinese city of Tianjin.
He said debt in the United States and elsewhere rose to "dangerous and indefensible" levels.
Liu's comments were unusually pointed criticism of U.S. financial regulation for a Chinese official. They added to suggestions by countries that are under U.S. pressure to liberalize their financial markets that Washington's model might not be ideal.
China has based its reforms on the U.S. system but has moved gradually. It has kept its financial markets isolated from global capital flows, prompting complaints by its trading partners.
As China made changes, "a lot of the time, we learned that what we had learned from our teacher the day before was wrong," Liu said, referring to the U.S.
China's state-owned banks have avoided the turmoil roiling Western markets. Chinese banks hold bonds from failed Wall Street house Lehman Brothers, but they are a tiny fraction of their vast assets.
Liu called for governments to create international standards and regulatory systems for globalized financial markets. He said Beijing has signed information-exchange agreements on financial regulation with 32 other countries since the turmoil began.
Liu pointed to China's experience with real estate and the collapse of a stock market boom.
As stock prices in China soared, banks were ordered to make sure customers were not using loans or credit cards to finance speculation. As a result, Liu said banks have suffered no rise in loan defaults even though stock prices have plummeted 63 percent since the October 2007 peak.
"We Chinese can share our own experiences with all the market practitioners," Liu said. "Maybe our experience cannot be applicable to developed markets fully. But still, I think it might be useful and helpful to those in emerging markets."
Chinese and foreign businesspeople at the forum said the credit crisis is likely to increase the influence of China and other emerging economies in the world financial system, though Wall Street will retain its leading role.
The crisis is also likely to reduce resistance in the West to investments by government funds as companies urgently seek capital, said Thomas Enders, CEO of the European aircraft producer Airbus Industrie.
However, European Union trade commissioner Peter Mandelson defended the global capital markets structure, warning that drastic change might hurt prosperity.
"The capital market system, fundamentally, is not flawed," Mandelson said. "We are not looking for some alternative, and I hope that people in the emerging markets, in China for example, are not looking for an alternative to properly functioning capital markets."
MyWay
The one home policy
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