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Cheng Siwei wants stronger int'l financial co-op
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09:47, September 13, 2009

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A prominent Chinese economist has called for stronger international financial regulations and cooperation so long as they leave countries free to tailor action to meet their individual needs.

Cheng Siwei, president of the Association for Soft Science Studies of China, made the statement in an interview with Xinhua on Friday at the Global Economic Symposium (GES 2009) held in Ploen Castle, Schleswig-Holstein, Germany.

"This is the first time that the world has united to face a financial crisis but different countries have different situations and interests," Cheng said. "It's not easy for them to join hands to deal with the financial crisis. Many problems need to be discussed, but I think this is a good trend for every country to come together to discuss problems, reaching some agreements and then taking some action."

"My view is that countries should make agreements on principles, not on details. Every country can take different measures according to their own situations, but all these measures should be legal, rational, appropriate and effective," Cheng said.

Cheng thought the international community should strengthen financial cooperation and regulation on four aspects.

First, regulation of shadow banking should be strengthened, said Cheng, as this area was currently unregulated.

Second, a reasonable leverage rate should be settled for financial sectors, said Cheng, because a high leverage rate on one hand means high financial efficiency, on the other hand, means high risks.

Third, we need to prevent excessive speculation on financial derivatives, said Cheng. The current uncovered position of world financial derivatives was 10 times world GDP and eight times the total value of world stock markets' bond balance.

Fourth, authorities should closely monitor hot money and money laundering, said Cheng. At present, there were 2 trillion U.S. dollars of hot money flowing around the world every day. Only 5 percent was used for trade, while 95 percent of hot money was just flowing to make profits.

Cheng said this situation needed regulators to take great care and that's the reason why now no country dared to lift interest rates alone. Any country that unilaterally lifted its interest rates would immediately attract hot money.

"So now when we talk about the fading out of easy money policy taken by countries, I think countries should take collective action instead of independent actions," Cheng said.

Talking about the Chinese economy, Cheng said, in the first quarter of 2009, the Chinese economy increased only 6.2 percent, lower than the last quarter of 2008, but the rate of the slowdown was much slower. In the second quarter of 2009, the growth jumped to 7.9 percent, resulting in a growth rate for the first six months of 7.1 percent.

He said China could realize its target of 8 percent of economic growth for 2009 without much problem and growth could exceed 9 percent by 2011.

Cheng also mentioned that the recovery was not very stable, as most of the increase was contributed by investment, while domestic consumption and foreign trade still needed to be fueled further.

Cheng also said, although the world had much higher expectations for China now, China should be clear about its own national strength. China should act as a responsible country in facing this crisis, but China should not and could not bear the responsibility that the developed countries should bear.


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