Roy Ho’s Blog

Treasury Secretary Henry Paulson is visiting China.   It is said that he will bring the issue of Tibet to China.  Among other items for discussion are: Chinese tariffs on environmental technology, restriction on financial markets open to foreign competition, the free currency exchange rate of Chinese yuan.  Forbes has a summary:

http://www.forbes.com/markets/feeds/afx/2008/04/02/afx4843254.html

A visit by Treasury is of course arranged way in advance.  So, Tibet is not what prompted the visit.  Neither would Tibet become the main focus at the last minute for a Treasury Secretary.  So, the Tibet talk is for domestic consumption.  Is the appreciation of yuan the point, now that Paulson is actually in China? 

Yuan has already appreciated 4% this year, i.e. 4% in 3 months.  That is quite a bit of appreciation in such a short period of time.  That topic cannot last long.  So, any accomplishment out of this trip would not be in this topic.  And someone like Paulson who has decades of experience in international banking knew that.   

So, what does he want to accomplish here? 

He will put some effort into the environmental technology issue.  However, he is not an expert.  If he has a delegation to go with him, then he will be able to facilitate a lot business card exchanges among the right people.  The irony here is US isn’t really a great leader in this field.  The strength is probably in the capital intensive side of this business, such as wide farms.   

Wang Qishan, the Vice Premier of China managing trades, is the counter part of Paulson.  They met when Paulson, while at Goldman Sachs, helped China restructure one of the big banks.  Therefore, they will be able to spend the most time on opening financial markets to foreign competition.  US’ interests will be on having foreign insurance, investment and banking companies to operate in China while China will say they are not ready yet.  An achievement should not be expected since this ought to be a long term negotiation.  Besides, China is waiting for a new President to deal.  They can also spend some time in the difficulty of conducting M&A in China.  However, if Paulson brings up that issue, then the conversation will easily be dragged into the difficulty of having M&A done in the states by Chinese firms.   

The importance for the US is this is the first trip since the new leadership in February.  So, this is a relationship building trip.  A lot of career bureaucrats of both sides need to find out who their counter parts are.  US’ new Trade counter part will give US less confrontation.  However, by no means negotiations will be easier.  This is a difference in style, not in substance.  Paulson will also gain a lot from this trip.  His Goldman Sachs resume put him to DC.  He paid back to his core constituency by the recent overhaul to make the industry more competitive in the global market place.  Now, his position of power opened even more doors to his post Treasury Secretary career.    

At least someone got something useful of Bush Administration.

Fubon has been approved to buy approximately 20% of Xiamen City Commercial Bank at a price of US$34 M.  The biggest shareholder of Xiamen City Commercial Bank is the Xiamen City government’s Commerce Bureau, approximately 24%.  Fubon is traded in international exchanges.  Fubon is expected to name members to the board.

Xiamen City Commercial Bank is a local bank.  Xiamen (Amoy) has the heavies concentration of Taiwan businesses.  This local bank is not a troubled bank.  The significance is not who bought whom, but the approval by Taiwan’s authorities.  This will be considered a plus for Fubon. 

Taiwan’s government bureaucrats are quick to recognize the president elect Ma and quickly steering to approvals that would be considered as consistent with his platform.  There probably will be other approvals before May that are considered favourable to businesses/industries building ties to Mainland China.