P 250939Z MAR 09
FM AMCONSUL HONG KONG
TO SECSTATE WASHDC PRIORITY 7238
INFO WHITE HOUSE WASHDC
USDOC WASHDC
AMEMBASSY BEIJING 
AMCONSUL SHANGHAI
AMCONSUL GUANGZHOU 
AIT TAIPEI 0243
CDR USPACOM HONOLULU HI

UNCLAS HONG KONG 000555 
 
 
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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