Snow urges faster China reform
(Reuters)
Updated: 2005-10-19 07:14

'Leapfrogging'

Snow said China could benefit by gaining quick knowledge of products like asset-backed securities, credit and currency derivatives, options and hedging devices, all of which could be used to reduce uncertainty and to let capital markets develop.

"China can quickly take advantage of these important advances and thereby 'leapfrog' in the development of its financial sector," Snow suggested.

In two days of discussions on Sunday and Monday, U.S. officials urged China to remove existing foreign ownership caps on financial institutions like investment-banking firms and to set up a national credit bureau to improve credit risk management.

Snow was returning to Washington on Tuesday but in a mark of the importance the Bush administration places on its broad relations with China, Defense Secretary Donald Rumsfeld arrived on the same day.

President George W. Bush is scheduled to visit next month.

Snow said China agreed it needed to transform its economy from one heavily reliant on exports to a consumer-driven model, which likely would mean less pressure on U.S. trade deficits.

At the same time China needed to focus on developing its capital markets so that money also could be raised on stock and bond markets rather than relying solely on bank financing.

"Beyond the United States, in Asia and elsewhere we have seen where the excessive reliance on bank financing has contributed to financial crisis," Snow said.

He added that stronger capital markets would "help China's economy shift from savings to consumption without sacrificing growth."