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

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Editorial Quotes
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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