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People's Daily Online>>Opinion

China gets peek at Wall Street's skeletons

(Global Times)

09:00, March 16, 2012

Greg Smith, a former executive director of Goldman Sachs, published his resignation letter Wednesday in The New York Times condemning the investment bank's toxic greed culture including treating clients as "muppets." The letter has created ripples on both Wall Street and Main Street.

Goldman Sachs, with other investment banks, represents the essence of American capitalism. They play a pivotal role in maximizing returns on the use of capital. As they expand into emerging countries, they have largely prompted the building of a local capital market. But their involvement and influence over the economy has caused suspicion.

Wall Street firms have been involved in multiple scandals. The possibility that they conduct morally questionable business in emerging countries cannot be ruled out. Similar to the US where investment bankers and senior government officials are closely associated, during recruitment in emerging countries, official connections are highly emphasized. It is a quick way to cut straight to the core power brokers of a country.

Refusing to do business with Wall Street firms might be more costly for emerging countries. They have to learn to deal with these financial sharks. China has accumulated wealth through its fast development. But it remains green in the financial world. It is like when poor people save some money. How they spend it remains subject to rules set by the rich.

A pressing problem for the local financial market is a lack of financial professionals. Home-run financial institutes can hardly compete with foreign counterparts in terms of compensation packages. A deepening brain drain in local financial circles seems set to last for a long time.

Financial security has become all the more important. China has the world's largest foreign reserves, but its financial system is rather underdeveloped. Ups and downs in the Western financial world have not happened yet here. Put another way, local players are likely to be trapped when making deals with Wall Street companies.

Financial warfare may not only exist in fiction. It could happen in real life and paralyze the real financial market.

It is necessary to stay wary of Wall Street big shots when making deals with them. China now has the world's largest amount of factories and construction sites. It needs world-class investment banks too. Otherwise, it will remain as the source of the world's "labor." This is a mission for this generation and those to come.


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Canada at 2012-03-1670.36.49.*
The film "Inside Job" was a fairly good expose of the Wall Street financial crisis. Counterparts not motivated by personal gain, given adequate training, are the best safeguards from the financial sharks.

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