Loans from China
Reader Andrew notes:
Wen, who is known for his openness and economic mastery, told Zakaria that despite the impressive growth his country has experienced over the past 30 years, things have changed because of the United States’ subprime problems. “We have seen a decline in external demand, and China’s domestic demand cannot be significantly increased in a short period of time. [So] we do risk a slowdown. We must re-adjust macroeconomic policy,” Wen says. “A U.S. recession would certainly have an impact on China’s economy. Ten years ago, China-U.S. trade stood at only $102.6 billion. Today the figure has soared to $302 billion-a 1.5-fold increase. A shrinking of U.S. demand would certainly have an impact on China’s exports. And U.S. finance is closely connected with Chinese finance. If anything goes wrong in the U.S. financial sector, we would be anxious about the security of Chinese capital.”
It is worth noting that China has already cut off lending to U.S. banks.
Update: reader Jon H. reports this is not official policy:
The China Banking Regulatory Commission’s statement:
The CBRC has never, by any means, ordered or told the Chinese commercial banks to stop lending to U.S. financial institutions. We strongly condemn the South China Morning Post for its irresponsible and groundless report, and we reserve the rights to take further actions including pursuing its legal responsibility if necessary.