Out of e-mail, Stratfor's weekly freebie notes that the PRC is signalling that it won't be able to make good on its WTO commitments to open up its banking sector starting in 2007.
The revelation came April 27, when a China Banking Regulatory Commission (CBRC) official said leaders are examining ways to protect the country's banking sector against foreign competition, while -- at least for now -- still honoring its commitments under the World Trade Organization (WTO).Though Shi Jiliang, the vice chairman of the CBRC, was careful to emphasize that China's WTO commitments are not in doubt, his discussion of achieving "an appropriate level of protection for Chinese banks" and taking efforts to "reduce excessive competition between foreign and Chinese banks" could hardly be lost on Beijing-watchers waiting for the government -- which faces a crisis of legitimacy on multiple levels -- to signal its next move.
If they sold off their entire USD currency reserves, they might be able to cover their bad debts but even then, they wouldn't have a banking sector left. That means a hard crash, mass unemployment (those SOE behemoths are still losing money hand over fist and would die without regular loans that nobody expects to them to pay back), and a hard crash that leads to the classic fragmentation/warlord scenario.
Nobody wants the PRC to hit a hard crash because nobody really wants to bet that the resulting warlords running splinters of China are all going to be reasonable about whatever nukes fall into their hands. I think, therefore, that Stratfor's a bit on the pessimistic side. People will throw them a lifeline, extend their WTO transition, lend them money, whatever it takes to avoid the possibility of a nut with a nuke.
We're often reading stories about how this or that government is willing to tariff the PRC in order to keep out their "unfair" competition. It's useful to read about it coming from the other side too.
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Posted by TMLutas at April 28, 2005 08:24 PM