NEW YORK, April 6, 2008
China Investment An Open Book?
60 Minutes: Sovereign-Wealth Fund's President Promises Transparency
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China's Sovereign Wealth Fund
For the first time, China's government-controlled $200 billion sovereign wealth fund discusses its investment philosophy and addresses concerns. Lesley Stahl reports.
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Stahl's Reporter's Notebook
Lesley Stahl discusses her story on China's government-controlled $200 billion sovereign wealth fund.
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Gao Xiqing, the head of China’s new sovereign-wealth fund pledges more transparency to allay fears that China will try to use its vast investment ability to exert economic or political control in the U.S. (CBS)
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"I think there’s a question as a degree of specificity," Summers said. "But in a way, their willingness to be interviewed and go on your show is probably not something they would do if they thought of themselves as having some nefarious purpose.
"Well, they certainly want to be reassuring," Stahl said.
"I think that is something we should encourage," Summers said. "But, as Ronald Reagan said, 'Trust and verify.' I think this is an issue our government does need to pay close attention to."
Summers is pushing for an official code of conduct for sovereign-wealth funds. The International Monetary Fund is working on writing some rules, but Gao thinks that's unnecessary.
"Why do you need a law like that? That law will only hurt feelings," Gao said. "It's not economic. It doesn't make sense. Politically it's stupid."
Stupid and unfair, he says, since American hedge funds and private equity firms don't have such a code.
"If you make some kind of, you know, someone singled out as a bad boy then that becomes a problem emotionally," Gao said.
"There was never a call for a code of conduct until China got set up a wealth fund," Stahl pointed out..
"Right. I personally don't have a problem with it, really. You know?" Gao said. "But that's why a lot of other Chinese people are telling us that, 'Look, you know, you guys should be against it. You should stand up against.' I said, 'Why should we bother?'"
"Does the IMF have the power to enforce a code of conduct anyway?" Stahl asked.
"I don't think so."
"Is there any chance on this earth right now, that we could ever say, 'Look, if you don't agree to a code of conduct, even voluntary, you can't invest in our companies.' It's self-defeating, right?" Stahl asked Summers.
"We could say it, but it wouldn't serve our interests at several levels," Summers said. "It would mean that Americans would pay more for goods. It would mean that our interest rates would be higher."
In other words, we’re all but dependent on Chinese investments. Beyond this fund, China holds half a trillion dollars in U.S. Treasury bonds. For that reason economist Navarro says they have us over a barrel. If they don’t like our behavior, he says all, they have to do is dump all their U.S. investments. It’s known as the financial nuclear option.
"What would that do? That will cause interest rates to spike. Mortgage rates to spike. Inflation to spike. The dollar to go through the floor. The stock market to go into chaos," Navarro said. "We would be in deep, deep, deep trouble."
"The nuclear option, financial nuclear option is China’s pulling all its money out of U.S. treasuries," Stahl said to Gao.
"Philosophically everything's possible in this world," Gao said. "But that's so unlikely that, you know, if we function on that thing, we just may as well go home and not doing anything."
Gao isn't going home. He says his fund is an extension of trust, not the betrayal of it. And to prove it, despite losing money here, he just made another investment by buying over $100 million worth of shares in Visa.
Produced by Shachar Bar-On
© MMVIII, CBS Interactive Inc. All Rights Reserved.
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Anything''s possible, but I will not wallow in abject cynicism. Not even when it''s fun to do.
Make both sovereign-wealth funds and hedge funds comply with International Monetary Fund (IMF) Code, nothing personal, no hurt feelings just prudent practices, for a change. Otherwise, Al Qaeda will be one more step further to its goal of %u201Cbleeding America into Bankruptcy%u201D
Why?
If China were big on "We will do the right thing, regardless of the examples set by the industrialized nations who preceded us.", they''d be all over the Kyoto treaty as being too soft.
They aren''t - in fact, they vigorously resist pollution control agreements and use our precedent-setting and quite lengthy record of being a veritable cornucopia of pollution emission sources as their justification.
And just what kind of precedents have we set across the globe when it comes to attempting to control - and even strangle - sovereign nations through the manipulation of financial markets and even their economies?
lollll...it takes a truly trusting - I daresay gullible - sort to believe that China is one to turn its back on either the development of new weapons or the deployment of tried-and-true weapons.
Particularly when those tried-and-true weapons have been directed at them numerous times in the not-so-distant past...
If 60 Minutes doesn''t like Sovereign Wealth Funds investing in the US then it should pass a law making it illegal.
Why doesn''t 60 Minutes go after the American legislators who permit SWFs to invest in America? It looks like the show tries to play on emotional fears, rather than facts, to make its case.
Is 60 Minutes on the way off the air? Didn''t CBS News hire Katie Couric to lead its evening news program further into the dumpster?
Well, at least, when the end comes, Lesley will be able to get a job with the STAR magazine.
Thanks George, for opening up free trade with the greatest human rights abusing Nation in the world. You will go down in history as the seed that destroyed Democratic America from within.
Let the propaganda begin.
Someone once said "You (US) will sell us the rope we will hang you with, that country has passed away and can not but their neighbor to the east will.
I don''t worry about their investment.
At the end of March 2008, Molokai Ranch dba Molokai Properties Limited, closed its doors, layed off more than 120 staff, as well as close all access to their properties leading to the beach indefinitely to the native Hawaiian of Molokai because of 5 years of delays and road blocks in getting their permits approved to develop and expand their resorts. Molokai is the 3rd smallest inhabited island of all the Hawaiian Islands. The Island population is approximately 4000. Molokai properties operates Molokai Lodge, Kaupoa Beach Village, the Kaluakoi Golf Course, Moanalua Gas Station, Moanalua Tri-Plex Theater, Cattle Rearing, and the Company''s Island Maintenance Operation. The relation this story has to China is that Molokai Ranch is said to be owned and operated by foreign investors from China who contracts the management work to Molokai Properties Limited. People in Hawaii are questioning whether or not a foreign investor can be held accountable for closing most of the critical infrastructure and business holding on island, as a way of getting back to the people of the Island who oppose any further development on the Island. If foreign investors can create this type of Chaos on a small island in Hawaii, can you imagine impact China will leave on the United States when they dont get what they want ??????? Just a little fruit for thought.
The Big Kahuna
we will lose most of our mfg jobs to them.
That''s why a good education is so important in order to compete in this world economy.
Remember Bill Clinton and John Huang? Who was MFN (Most Favorite Nation) when Bill was in charge?
DO you know any "poor" democrats? Have you seen the Clinton''s Tax Returns?
Who does Pilosi''s and Feinstein''s Husbands do business with?
I think all people have greed ... don''t just chalk it up to Republicans.
Remember Bill Clinton and John Huang? Who was MFN (Most Favorite Nation) when Bill was in charge? Did he challenge China on Taiwan?
DO you know any "poor" democrats? Have you seen the Clintons''s Tax Returns?
Who does Pilosi''s and Feinstein''s Husbands do business with?
I think all people have greed ... don''t just chalk it up to Republicans.
Remember Bill Clinton and John Huang? Who was MFN (Most Favorite Nation) when Bill was in charge? Did he challenge China on Taiwan? Have you heard Bill Clinton''s speeches outside the US?
DO you know any "poor" democrats? Have you seen the Clintons''s Tax Returns?
Who does Pilosi''s and Feinstein''s Husbands do business with?
I think all people have greed ... don''t just chalk it up to Republicans.
And...selling out America? I think the democrats have a lot more to do with that than Republicans.
Remember Bill Clinton and John Huang? Who was MFN (Most Favorite Nation) when Bill was in charge? Did he challenge China on Taiwan? Have you heard Bill Clinton''s speeches outside the US?
DO you know any "poor" democrats? Have you seen the Clintons''s Tax Returns?
Who does Pilosi''s and Feinstein''s Husbands do business with?
I think all people have greed ... don''t just chalk it up to Republicans.
And...selling out America? I think the democrats have a lot more to do with that than Republicans.
Remember Bill Clinton and John Huang? Who was MFN (Most Favorite Nation) when Bill was in charge? Did he challenge China on Taiwan? Have you heard Bill Clinton''s speeches outside the US?
DO you know any "poor" democrats? Have you seen the Clintons''s Tax Returns?
Who does Pilosi''s and Feinstein''s Husbands do business with?
I think all people have greed ... don''t just chalk it up to Republicans.
And...selling out America? I think the democrats have a lot more to do with that than Republicans.
But they thought we said "Buy America!"
Hey, but you can''t blame them for buying our country--we mortgaged it and went bankrupt and now our souls are sold.
Learn to speak Chinese if you want opportunities for advancement at work.
Your report neglected to mention a very important line of defense against national-security threats that might arise when foreigners buy U.S. assets, an omission that effectively overstates U.S. vulnerability to SWFs. That line would be the Committee on Foreign Investment in the U.S. (CFIUS), a multi-agency panel, chaired by the Treasury Dept., that examines the national-security implications of foreign acquisitions, as it did in the 2006 Dubai Ports World deal. CFIUS%u2019s net won%u2019t necessarily capture every risk inherent in cross-border deals %u2013 it%u2019s not meant to. But the U.S. is not bereft of protections in this regard, as some might think after watching your report.
Cheers,
Chris
Your report neglected to mention a very important line of defense against national-security threats that might arise when foreigners buy U.S. assets, an omission that effectively overstates U.S. vulnerability to SWFs. That line would be the Committee on Foreign Investment in the U.S. (CFIUS), a multi-agency panel, chaired by the Treasury Dept., that examines the national-security implications of foreign acquisitions, as it did in the 2006 Dubai Ports World deal. The CFIUS net will not necessarily capture every risk inherent in cross-border deals. It%u2019s not meant to. But the U.S. is not bereft of protections in this regard, as some might think after watching your report.
Cheers,
Chris
People like to compare these current concerns with US complaints about Japanese investments in the US 15 years ago. Sony is not the Japanese government. Sony is a corporation motivated by profit. The Chinese Sovereign Wealth Fund represents the Chinese government. If California would change lucrative investments in Iran and Darfur for political reasons, why don''t we think China would ever do this? And their motivations aren''t as noble as CalPERS'' was. CalPERS tried to influence these countries. Do we really think China would never try to influence our companies or try to manipulate our economy? They''re influence will only grow from where it is today.
The answer is to spend no more than we earn. Period. And don''t give away $450 billion when you have to borrow to do that. Guess who''s lending the money for that stimulus?
On the other hand we have the Chinese model. Their markets are closed. Racial minorities are shot in the steeets of Tibet. They don''t allow the free movement of people, commerce, or ideas. Workers are without basic human rights, they live and die at the whim of the state or worse of petty corrupt local officials.
Every time it appears to the world that the United States is failing, it will encourage so many nations to adopt the ruthless statism of China. Men like Mugabe follow the Chinese lead already, but other countries hang on the brink, such as South Africa.
This is every bit as dramatic as the cold war, and unfortunately the Chinese are winning in a runaway victory at this time. The fate for the world will indeed be ugly. We must insist that the concept of a "sovereign wealth fund" is an attakc on the open market concept, that it is an assertion of the rights of a ruthless state over the rights of people and commerce, and if we do not fight this thing with every effeort of our system we ill fall into the ultimate darkness, to die along side the other forgotten races killed by the Chinese or other nationalistic haters.
Posted by SharnCedar at 01:20 PM : Apr 07, 2008
Well, not counting things like hedge funds, which have resisted oversight - with this Administration''s assistance - to even the extent that stock-issuing corporations must undergo.
And now we all have to pay huge sums of money for the havoc wreaked by just that one little piece of the hidden powers that control our economy...
I hope that a similar thing won''t happen here in the states.
Borrowing from China might work short term but you''re going to have to get Fed Chm. Bernanke to quit lowering the CD rates because it''s not going to get the economy going. There''s no guarantee that they are going to pass enough through to the borrowers. I understand the investment bankers that are involved in credit cards are even raising their interest rates. He''s bailing out the wrong people and the Fed still isn''t putting regulations in place to stop what''s going on. Too many lobbyists. The only thing that would change the investment banks technique would be if they nationalized one when they got in trouble like England did with Northern Rock in February. Look it up on the Web.
Yours truly, Disgusted Middleclass Taxpayer
1. Money is only as good as what it represents, thus the declining value of U.S. Goods & Services is only represented economically. A gallon of gas, whether it cost $0.15 or $5.00 /gallon is still only a gallon of gas.
2. Our competitive economic system has made us paranoid. If U.S. companies were competent, Chinese companies wouldn''t have to bail them out.
3. There are serious flaws in the U.S. Legal System, Corporate America, and the U.S. Educational system which prevent necessary changes and inhibit new ideas/industry. Although we live in a democracy, we essentially live in an economic anarchy.
Posted by rharm888 at 05:01 PM : Apr 07, 2008
Precisely, as opposed to the Chinese system of a directed and controlled economy whose purpose is to a military and racial conquering of nearby peoples such as the Tibetans and the Uighurs and the Taiwanese.
Anarchy as you call it, if practiced by every nation, is the greatest good for the whole world. Then each individual can contribute based on their ability. This is a "flaw" in America only when cheater countries exist, such as India and China. Thus for the common good, we need to stop the "cheaters" or else all of us must become cheaters too to survive.
It''s like the prisoner''s dilemma in game theory. Do we have the will to work together to stop the cheaters for the common good? Or will they prevail?
The first step is to outlaw and stop sovereign wealth funds altogether.
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by cmg881
April 8, 2008 10:58 AM PDT
- "The first step is to outlaw and stop sovereign wealth funds altogether." -- SharnCedar
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See all 45 CommentsThat''s like saying we should outlaw rich people or bad weather. How would we even begin to "outlaw" something over which we have no jurisdiction? And who would do it? Washington? The "international community" (whatever that is)? There''s a reason these funds are called "sovereign": They are arms of sovereign governments, which may create as many SWFs as their reserves allow and use them for whatever purpose they wish. If by "outlaw" you mean the U.S. or some international grouping (the OECD?) should prevent SWFs from buying locally resident firms, that raises other questions. What of the free-trade principles we are constantly lecturing the rest of the world about? What about the SFWs of Canada or Norway, whose capital we could surely use and who are eager to invest in U.S. assets? Ms. Stahl''s report, and much else that has been written about SWFs, tends to simplify the issue as a matter of benign, free-market economies being threatened by predatory foreign money. It''s not as simple as that. But then, there''s very little that TV "journalism" can''t boil down to some misleading simplicity.