No to ‘President Rice Wine’
Any one who has seen the video clip in which President Ma Ying-jeou (馬英九) held a rice wine bottle and boasted of his achievement of maintaining rice wine prices at US$0.85 on many of his campaign stops cannot but wonder how low things can go for Taiwan’s presidential election.
Ma cheerfully and repeatedly said he wouldn’t mind if he were called President Rice Wine and former KMT chairman Lien Chan (連戰), in stumping for Ma, introduced the president with the nickname Ma Mi-jeou (馬米酒, “Ma rice wine”) to the crowd. Yes, this was a surreal scene that one might mistake for Ma promoting the wine’s sale.
For a president without notable achievements during his term, Ma has resorted, in addition to more lies and mudslinging, to a tasteless policy to fool and win votes from amused but ignorant voters.
If adopted in a mature democracy like the US, this tactic would have drawn a wave of criticism from the media and killed Ma’s re-election bid right away.
However, as usual, the Taiwanese media gave him a pass. This has emboldened Ma even further and now he has claimed credit for selling pineapple cakes to Chinese tourists.
In doing so, Ma has reduced his presidency to a trivial position, as in his first meeting with Association for Relations Across the Taiwan Straits Chairman Chen Yunlin (陳雲林), during which the latter addressed Ma with the pronoun “you.”
The denigration of Taiwan’s presidency appears like an overt conspiracy aimed at chipping away Taiwan’s sovereignty. Still, Ma appeared contented and claimed a president should solve people’s trivial needs before tackling something big.
Apparently, Taiwanese voters are either too gullible or Ma is too arrogant. Make your pick, come January.
Yang Ji-charng,
Ohio
China’s risky banking system
Given the size of China’s population, many foreign investors and governments will always salivate at the prospect offered by China’s high growth without realizing that they have been sucked into an economy whose operation under the communist regime they had not really understood (“Treacherous road for bank expansion in China,” Oct. 19, page 3).
Cultivating guanxi, which is mostly associated with bribes, corruption and kickbacks, with high-ranking officials in China puts them [the foreign investors] at the mercy of their hosts.
During the Asian financial crisis of 1997, China saw two of its financial institutions in Guangdong Province collapse, one of which was the notable Guangdong International Trust and Investment Corp (GITIC), which was established in 1980 and owned by the Guangdong Provincial Government.
The collapse of these two financial institutions revealed the massive non-performing loans that were given to Chinese red chips, ie Chinese companies incorporated outside mainland China but whose shares are listed in Hong Kong. Investment bankers, flogging shares of China’s state-owned banks, had admitted that much of the improvement in the balance sheets of China’s banks comes from re-classifying hundreds of billions’ worth of risky loans from “non-performing” to “special mention” — and not because of any genuine change in lending practices.
In the wake of the last recession, China’s local governments undertook massive infrastructure projects that saw them racking up huge debts funded by borrowings from the banking system rather than through the issuance of government bonds.
These debts were channeled through “special purpose” financing vehicles, which are basically state-owned enterprises that allow them to skirt the laws that require them to keep balanced budgets.
China has yet to experience any bear market cycles, although some economic signs are beginning to indicate slower growth. Its high growth rates are economic sleights of hand that have come at the price of escalating bad debts and non-performing loans. This does not include the amount of debt in China’s shadow banking, whose participants, as lenders, include these state-owned enterprises.
The Chinese banks, which were carved out of the old communist banking system only at the turn of the millennium, have been bankrolling these state-owned enterprises, which would otherwise have gone bankrupt.
In a socialist economy, a poor banking system and cheap loans combined keep inefficient state-owned enterprises afloat. This also means that a lot of goods are produced that should not be produced at all as it leads to a massive misallocation of resources and waste. As this is the case in China, it also explains how it managed to achieve its high growth. With cheap loans financing massive economic expansion, China’s bad debts might be approaching the threshold before the bubble bursts, bringing with it the banking system.
Because of this, China’s economy has to keep moving lest its state-owned enterprises fail to service their debts and the entire banking system implodes.
Hence, for Taiwanese or any other foreign banks to expand in China is simply suicidal.
Andrew Michael Teo
Singapore
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