George S. May Business Blog

Wen Jiabao issues statement of concern – possible reasons why Worrisome Wen is being a Nervous Nelly

“We have made a huge amount of loans to the United States. Of course we are concerned  about the safety of our assets. To be honest, I’m a bit worried. I would like to call on the United States to honor its words, stay a credible nation and ensure the safety of Chinese assets.” -Chinese Premier Wen Jiabao 3-13-09 (pictured left)

This is interesting, first off, that the Chinese Premier would issue such a statement now, as many are under the impression that we are on our way out of the current crisis. So, in looking in from the outside, all I can wonder is: what does he know, or think he knows, that we do not? In reviewing the multitude of coverage on the statements made by Wen Jiabao, I feel more and more as though we can likely attribute these statements to a fear for his own economy. This may be one of those rare times that a man, speaking on behalf of the Chinese government, has displayed a position of weakness. Think about it, if he was so concerned about this, what is stopping him from going and selling those government bonds? The answer, well, he can’t.

Or on the other hand, maybe as he reads of the possibility of a second stimulus package coming from the US government, he is becoming nervous of more US spending. This could very well be a plea, recommendation, even warning, from the Chinese premier saying, no more!

Either way, these comments should not be taken lightly.

However, I do believe that the US will, and should in some regard, uphold its position it has maintained throughout, in that, really a major part of the reason China is in the fix that it is in (holding all these US assets) is the result of a policy instated by the Chinese to drive its economy by exports to the US. So in that light, China’s “situation” is essentially not the US’ fault or problem.

Or it could be an OPEC-like situation where Wen Jiabao is trying to get his shot in before the upcoming meeting in London. He probably knows that he won’t get exactly what he wants, so, in effect he is putting it all out on the table. That way when he goes into the meeting we know is stance, but he doesn’t have to maintain as extreme of a tone which is never conducive to working out any type of policy.

In the end, I hope that it is simply the last solution mentioned. Wall Street has been up this week, the credit market is thawing out, the last thing our economy needs is another unseen pothole in the road to recovery.

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