60 Minutes Report: China’s Soverign Wealth Fund

Monday, April 7, 2008 12:05

One of the few shows I miss is 60 minutes. Like Law and Order, I religiously watched each episode as I believed that they were bringing something of real value to viewers.. something to make me think.

For the last 6 months, there have been a lot of questions about China’s economic and monetary power as it relates to their USD holdings and sovereign fund, and so I watched their China Investment An Open Book? 60 Minutes: Sovereign-Wealth Fund’s President Promises Transparency clip with great interest

 

The beginning really started off very poorly with Stahl making fun of his name and going straight at him as a vulture investor who was looking to leverage his 200 billion for “other” purposes.

After a few minutes she finally gives him a bit of room to address a few myths but then enters economist Peter Navarro, who I think was prepped by Lou Dobbs before the show. He readily admits that no one paid attention to sovereign funds before, and that the Chinese warrant a second look.. because they might cause “mischief”. that they will buy up American assets, core out the jobs & R&D, and that he knows this from a clear pattern of behavior of trade barriers, RMB manpulation, IPR, etc.

Back to Gao who explains that part of the reason why they are only investing in financial assets (i.e. not industrial) is simply because there is this fear in the market and they want to avoid it. Never mind the fact that their might be good assets/ investments for CIC or those who are asking for CIC’s investment…. and the rest of the clip looks at Gao, his intentions (and experience on Wall Street.. that could be used for something unclear), and the lack of transparency at CIC

Where I am bothered is not so much that sovereign funds, including CIC, are suspicious, it is that only CIC is suspicious. that with only 6 months of very public investments, people are still asking for an annual report. That even though they have to date done nothing illegal, or shown any inclination to “core” out companies… they are still suspect too be just that (interesting that the Chinese fund is guilty until they prove themselves innocent)

Mr. Gao is right in many ways by pointing out that many of these new rules and regulations were not being called for until China entered the game, and that is unfair. That US funds (PE and VC) have been operating in much the same capacity for years without so much as a hint of the scrutiny… and he is right. If there really is a need on a market wide basis, and I say there is, then regulators need to present that case.

to be honest, I am disappointed in Stahl’s (perhaps her editors) stance. This is a group that has been famous for taking a hard look at things, and I think they chose the easy path. Rather than make this about the role of sovereign funds, or even look at the fact that the “red scare” is more hype than anything, they played right into a line that Lou Dobbs and others have.

The fact is that the US would not need these investments were its own fiscal house were in order, and Perhaps Ms. Stahl and the rest of the US would be happier if it were another country making the investments…but perhaps it would be better not to create the financial mess that is currently the US economy in the first place?

Politicians need to get off their stumps on this one because the alternative really isn’t one they are prepared for. they are not prepared to take the heat with the fund decides not to support any US investments, and given all the whining you hear about the lack of access US firms have in China… one can only imagine when China shuts off the tap completely.

How about that for a scary plan?

If you need more on Stahl’s theories on how other countries saving the U.S. from financial ruin is a bad thing…. you can see her journal notes here. Honestly, I do not see the difference between this reports and Lou Dobbs… and that is sad

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4 Responses to “60 Minutes Report: China’s Soverign Wealth Fund”

  1. Will Lewis says:

    April 7th, 2008 at 3:52 pm

    Hi Rich,

    I disagree with you about the portrayal of CIC and Mr. Gao. I thought he came off great, and I hope the rest of 60 Minutes viewers are now less afraid of CIC. I link to my whole post on my name.

  2. Rich says:

    April 7th, 2008 at 8:05 pm

    Will,

    The only reason I would disagree with you is that I don’t think they gave him proper time, and the tone in my opinion is very “red scare”.

    For me, what showed through more than anything was that China has had time to do anything wrong yet…. but that we should be wary anyway. Mr Gao is right in feeling that CIC (and I would add china itself) is being singled out, and that is not a good thing for the relationship long term.

    Also, after a few hours of resting on this, I was also left to wonder how interesting it is that nearly every U.S. governor has made a trip to China looking for Chinese investment, and quarter of the states now have an office in Shanghai (not sure about Beijing). If everyone is so afraid of the investment, why is it that these offices exist? Sure, part of their mandate is to boost exports from their state, but it seems interesting to me that you have states actively looking for investment and then the nation looking the other way.

    R

  3. Rudi says:

    April 8th, 2008 at 8:56 am

    Thanks for a reasonable analysis of the report.

    Two thoughts:
    1. I agree that there is a lot of ‘fearmongering’ going on. I think the tone of the report is very unfriendly to Gao Xiqing himself, and otherwise overly nationalistic, largely along the lines that “we cannot allow THEM to own OUR economy.” This reading (or viewing, if you want) of the report might be described as a progressive perspective. Interestingly, on the right, the report is brandished on a website meant to expose “liberal media bias,” pointing to “panicky protectionists.” I find myself in strange company. (See the article on http://newsbusters.org/blogs/jeff-poor/2008/04/07/60-minutes-attacks-sovereign-wealth-funds-unlikely-scenarios)

    2. The real and BIG problem with the 60 minute report is that the nonsensical populistic rhetoric — what you call “red scare” — invites the audience to forget the links between US debt — on all balance sheet, public, households and firms, particularly banks — and SWFs such as CIC. That Gao has a bunch of cash on hand is at least partially a result of the US living way too large …

    Rudi

  4. taylor says:

    April 9th, 2008 at 3:18 am

    Peter Navarro needs no prep time from Lou Dobbs, he’s an unabashed China hater all on his own. There’s no better way to fulfill his prophetic book title “The Coming China Wars” than get out there and tell the public that Chinese sovereign funding is part of a greater Chinese plot to harm the US.

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