MEDIA REACTION: G-20; TOXIC-ASSET PLAN

UNCLAS HONG KONG 000555 DEPT FOR INR/R/MR, INR/IC/CD, I/FW DEPT FOR EAP/PD, EAP/CM, EAP/P DEPT FOR VOA/BRF, TV-WPA WHITE HOUSE FOR NSC PRC POSTS FOR PA AIT USPACOM FOR FOR CIS PD ADVISER E.O. 12958: N/A TAGS: OPRC KMDR SUBJECT: MEDIA REACTION: G-20; TOXIC-ASSET PLAN TOPICS: ¶1. G-20 ¶2. Toxic-asset plan HEADLINES AND EXCERPTS: ¶1. G-20 "Cash-help proposals merit serious G20 study" The independent English-language South China Morning Post said in an editorial (3/25): "Cognoscenti have been debating, with some urgency in the past few months, an arcane international reserve asset known as 'special drawing rights' issued by the International Monetary Fund to its member states. Now, China's central banker Zhou Xiaochuan has put that debate at the centre of the global agenda dictated by the financial crisis. Ahead of next week's Group of 20 summit meeting, finance chiefs and central bankers of the world's leading economies are under intense pressure to prepare concrete and creditable measures. Proposals - by China and others - to expand the use of SDRs may also push forward discussion of a new economic order which, in future, could be less dependent on the U.S. dollar.... Mr Zhou may well be right about the world being better off with SDRs as a new international reserve currency to replace the U.S. dollar. But any such far-reaching overhaul of the global monetary system will surely lie in the future. G20 chiefs have a more urgent task - to contain the immediate damage inflicted by the economic turmoil.... Financier George Soros and Nobel Prize-winning economist Joseph Stiglitz have recently proposed richer countries should expand the use of their SDRs as a low-interest credit facility to lend hard currencies to troubled economies. Their proposal, along with China's, will help tackle a myriad of problems plaguing the world economy. But, despite Mr Zhou's assertion, they do not threaten the dollar's reserve currency status, at least for now. They do, however, deserve serious attention at the G20 meeting." ¶2. Toxic-asset plan "U.S. Treasury Secretary bets all stakes at one throw, success or failure is not yet known" The independent Chinese-language Ming Pao Daily News had an editorial (3/25): "...Funds are happy, banks are reserved, scholars have different opinions, the stock market is optimistic and has hope for the 'toxic-asset removal plan', all these fully reflect that all parties are absorbing different signals based on their various 
stances, understanding and interests. Thus, we will have to wait and see the success or failure of the 'toxic-asset removal plan.' But we should pay attention to three messages delivered by the major moves of the Federal Reserve and Geithner, and the moves of some individual U.S. banks in the past seven days. First of all, the Federal Reserve's move is described as 'giving it a try.' Geithner's move is described as betting all on one single throw. Some people describe the Federal Reserve and Geithner's moves as taking drastic measures to deal with an emergency. These descriptions show the U.S. determination in solving the financial crisis. The immediate positive reaction of the market shows that the U.S. moves in dealing with the crisis have gained confidence in the U.S., as well as the world. Secondly, there are two important people in dealing with the financial crisis in the U.S. They are the Federal Reserve Chairman and the Treasury Secretary. At the beginning of the crisis, people criticized Bernanke's wait-and-act attitude. However, after his several moves, his decisiveness is seen and his creditability established.... The leap of the stock market shows that Geithner has temporarily passed the test. Although the result is not yet known, he can, at least, reduce the huge political pressure for his stepping down. Thirdly, Goldman Sachs Group Inc. accepted US$10 billion government funding last October. The Wall Street Journal quoted sources saying that Goldman Sachs is considering selling parts of its ICBC (Industrial and Commercial Bank of China) shares, after the lockup period, to raise US$1 billion to pay back the government funds.... If banks start to pay back debts, it shows that banks' operations are better. Such a change will have a universal meaning: the darkness that U.S. banks face may be close to seeing the daybreak." "Comments on the 'toxic-asset removal' plan are divergent; people should not be too relaxed" The pro-PRC Chinese-language Hong Kong Commercial Daily wrote in an editorial (3/25): "...The U.S. introduced the 'toxic-asset removal' plan, hoping the government and the public's money can work together to 'loosen' the burden on banks which refuse to lend money due to the 'toxic assets'. The U.S. hopes to restore the liquidity of the credit market in order to drive the development of the economy. Various reactions can be seen: the rebound of the stock market seems to be a psychological effect; while praising its plan, the U.S. administration shows its helplessness and worry; those in the stock market that applaud the plan are those private funds which can directly profit; banks give a cool response; some influential economists strongly criticize the plan. Judging from the reactions of all sectors, investors should be calm in their observations and should analyze the market objectively. They should not think of the market rescue measures and the surge of the stock market as magic drugs. They should know that the financial crisis is far from over. It is unwise to be overly relaxed." DONOVAN