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, said Mr
Liu Mingkang, chairman of the Chinese Banking Regulatory
Commission.
'When US regulators were reducing the down payment to zero, or
they created so-called 'reverse mortgages,' we thought that was
ridiculous,' Mr 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.
Mr Liu's comments were unusually pointed criticism of US
financial regulation for a Chinese official. They added to
suggestions by countries that are under US pressure to liberalise
their financial markets that Washington's model might not be
ideal.
China has based its reforms on the US 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,' Mr Liu
said, referring to the US.
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.
Mr Liu compared Washington's proposed US$700 billion (S$999
billion) plan to revive credit markets to fast food and said the
world needed to look at longer-term solutions.
'Fast food is convenient. This US$700 billion package must ease
the concerns and build up confidence. But if you only take this, it
doesn't agree with your stomach. You should think about Chinese
slow cooking and slow food,' he said.
Mr Liu called for governments to create international standards
and regulatory systems for globalised financial markets. He said
Beijing has signed information-exchange agreements on financial
regulation with 32 other countries since the turmoil began.
Mr 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, Mr Liu said banks have suffered no rise
in loan defaults even though stock prices have plummeted 63 per
cent since the October 2007 peak.
'We Chinese can share our own experiences with all the market
practitioners,' Mr 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 business-people at the World Economic Forum,
the Chinese leg of the forum based in Davos, Switzerland, 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.
'I believe this kind of regional financial strength will play a
bigger and more important role,' said Mr Jiang Jianqing, chairman
of state-owned Industrial & Commercial Bank of China, the
world's biggest commercial lender by market capitalisation.
'Right now the market is very unitary,' with US bonds dominating
global holdings, Mr Jiang said. 'This kind of a unitary,
overcentralised market is something we need to change.' Still, he
said, Wall Street's 'dominance will continue.'
The European Union trade commissioner, Mr Peter Mandelson,
defended the global capital markets structure, warning that drastic
change might hurt prosperity.
'The capital market system, fundamentally, is not flawed,' Mr
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.'
The crisis is likely to reduce resistance in the West to
investments by government funds as companies urgently seek capital,
said Mr Thomas Enders, CEO of the European aircraft producer Airbus
Industrie.
Critics have questioned the possible political motives of
state-run funds and an EU official warned last year they might face
restrictions if they fail to disclose more information about their
goals and tactics.
'I would dare to predict that, yes, one of the big changes we
will see is greater acceptance of sovereign wealth funds,' Mr
Enders said. -- AP
