Tuesday, March 14, 2006

Dear All,

Wen gave a pretty important press conference yesterday at the NPC in which he said "...we must resolutely push forward reform and opening, walk the path of socialism with Chinese characteristics. Although moving forward will be difficult, we must not stop; the way back is a dead-end." So, things are about to get really interesting since this was clearly a very strong message intentionally telling the world that Wen is supportive of further reform. This stands in sharp contrast to, if not in opposition, to Hu's call for reviving Marxism. I don't know what prompted Wen to make this statement, but perhaps out of personal preference or pleads by his advisors (as well as Jiang's people) that Hu's leftism now needs some adjustments. Undoubtedly, this strong signal will give heart to those neo-liberal economists and reformers in the government, who had been feeling a bit defensive lately.

Wen also said that the bank listings will go forward, as expected. BUT, in answering the WSJ reporter's questions that "whether you will support Citibank's bid to acquire majority stakes in the Guangdong Development Bank?" His answer was "in the process of handling commercial banking reform, we must insist on two principles 1. THE STATE MUST HOLD MAJORITY CONTROL, which guarantees the control over a vital economic flow and prevents financial risks 2. strengthen management of the entire process of reform, perfect internal control and monitor and prevent the loss of state assets"

Man, the folks at Citibank must be feeling pretty painful tonight. With Huang Ju's absence, Wen's words are the law, so that's it for that deal. I think this will give the Societe General/Shougang combo a renewed chance of taking a minority stakes. Mm, what should they do? Well, if Citibank had been active in other bank deals (like with city commercials), I would just cut my losses with this deal. GDB is pretty crappy anyway. I would much rather hold high minority stakes in several good city commercials. But I haven't heard any Citibank deals on the horizon with other smaller banks, so this is all they got.......

The AWSJ piece on this topic says "The premier didn't answer a question about his views on Citigroup Inc.'s effort to buy a controlling stake in Guangdong Development Bank. The potential deal would require Beijing to ease its current 25% cap on foreign ownership of domestic banks." No, he answered it, he said "in the process of handling commercial banking reform...." not in the process of handling "state-owned commercial banking reform" which would indicate that the majority control rule only applies to the Big Four banks. His language suggests that the state controlling majority rule still applies to all commercial banks.

温家宝:继续改革国有商业银行 要避免大的损失

央视国际 (2006年03月14日 12:18)

  中新网3月14日电 中国国务院总理温家宝在今天的记者招待会上强调,改革要继续推进,同时注意随时总结经验,避免损失,特别是大的损失。



One spinning that explicitly mentions Citibank and GDB.

You make it appear that Hu and Wen are taking different roads. In fact they are not. Hu is widely reported in the Chinese-language media talking to Shanghai delegates on 6 March. He stressed the same things regarding reform and opening up as Wen. Lets be clear though, the "reform and opening up" Hu/Wen speak of is markedly different than that of Jiang Zemin days. This is a standard HJT tactic, keep the slogan, but the content behind the slogan is Hu's - witness his recharacterisation of the three represents as about serving the masses.
True, I don't think they are quite diverging at this point, but I wouldn't be surprised if they do in the future. I think both Hu and Wen's advisors told them that they need to balance their signals a bit to prevent a resurgent leftism.
i would direct folks to the latest piece by Barry Naughton in the China Leadership Monitor. He looks at the debate of neo-liberal ec. policies and framing the sale of state banks in this context. I think the left are shooting themselves in the foot by preventing market solutions to the rural poor. Microfinance in that area has been dismal under government directives. Let the professionals in - we might see better results.
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