MEDIA REACTION: RMB INTERNATIONALIZATION, CHINA'S FINANCE

UNCLAS BEIJING 001263 DEPARTMENT FOR INR/R/MR, EAP/CM, EAP/PA, EAP/PD, C HQ PACOM FOR PUBLIC DIPLOMACY ADVISOR (J007) SIPDIS E.O. 12958: N/A TAGS: OPRC KMDR CH PREL ECON SUBJECT: MEDIA REACTION: RMB INTERNATIONALIZATION, CHINA'S FINANCE AND BUDGET REFORM, U.S. ECONOMY -------------- Editorial Quotes -------------- ¶1. RMB INTERNATIONALIZATION "Editorial: We should be cautious about the internationalization of the RMB" The independent Chinese weekly business newspaper distributed in major cities throughout China, Economic Observer (Jingji Guanchabao) (05/11) "A currency's internationalization should be the choice of the market, not the behavior of the government. The government should do its own things well, but not too aggressively focus on results. When market conditions mature, the government should grasp their chance trend accordingly. China should first begin to use the RMB when trading with border countries. It is already in the process of doing this. Then the RMB should be 'Asianized.' The ultimate goal of the internationalization of the RMB is making the RMB the main currency in pricing, settlement and reserve. The RMB is still not freely convertible and its exchange rate mechanism is still in the process of reform. The internationalization of the RMB depends not only on the changes in demand in external markets but also on the reform of its own financial system and China's currency." ¶2. CHINA'S FINANCE AND BUDGET REFORM "Democracy is needed for budgeting reform" Global Times English (English-language daily published by the People's Daily): "China's administrative organizations have critical power in deciding budgets, while the People's Congress has little authority to supervise them. The annual budget introduced in the People's Congress is usually vague and inaccurate. Under these conditions, the right-to-know is but an empty principle and national assets are easily co-opted as personal property by some bureaucrats. A modern nation must have proper finance regulations. The main task of governments in modern nations is to serve tax-payers with their money. Public budgeting reform can be implemented through three approaches. The first approach is a technical reform of the governmental bureaucracy. The second approach focuses on openness and transparency in government budgeting. The third approach is the regularization of public budgeting to reinforce People's Congress auditors. The first approach to reform is easier than the others, but its effect will be limited without the other two. Public budgeting reform cannot be successful without prodding from the People's Congress. That body must show its willingness and power to handle the issue, pushing budgeting reform in order to realize finance democracy." ¶3. U.S. ECONOMY "It is too early to be optimistic about the U.S. economy" The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(05/11): "Federal Reserve President Ben Bernanke recently said that in this year, the American recession may end. This is a positive signal for China. However, China should be reserved and exhibit a neutral point of view. China should treat the crisis as an opportunity to rationally observe the possible results given this development. Currently the U.S. economy is experiencing the worst crisis in history. China could use the situation as a chance to predict the possible destruction, influence and length of a similar crisis. The assets market will experience a profound and lengthy fall during the crisis. Real estate prices will experience a 6-year drop. Even if economic growth stabilizes after the crisis, economic recovery will take a long time. The process by which the global economy will step out of this recession is a long one. There is the possibility of another downturn. It is still too early to conclude that the positive trend of the U.S. economy will directly influence the Chinese economy." PICCUTA