By You Nuo

When most Chinese were still having their National Day holidays, the US Congress passed, after having rejected it a week earlier, the $700 billion US financial-market rescue plan.

Yet despite their holidays, not a small number of Chinese, judging from opinions in the business press and Internet business blogs, have kept a close watch on the US credit crisis ever since the subprime debacle a little more than a year ago.

The bailout plan is designed to unlock credit markets and restore confidence in the banking system in the United States. But despite the massive amount of taxpayers' money it demands, it only serves as the beginning of an even larger task of plugging the many holes left in the global financial system from the last decade or so, if not revamping or rebuilding the system altogether.

Some critics have even gone so far as to say the passage of the plan could only serve to buy time for seeking the more serious solutions, if not just for holding the election.

Most probably, China, as well as many Asian economies, will be forced to take their parts in the game even before the future solutions are sketched out. This may come in some months, or in just a few weeks. But it will be a rather cruel reality to face.

Backed by both high domestic savings and export revenue, the Asian economies are like commercial banks. When there is an unprecedented credit crunch in developed economies, for financial institutions and for all large and small companies in general, the liquidity that can be generated from Asia can be a health booster. It would be a pity if these resources are not leveraged.

It would also be in China's own interest to keep financing the healthy part of the US economy, as a way to both recycle its export dollars and create future business opportunities, at least to let the American consumers keep buying things.

But just as US taxpayers are reluctant to give their money to all-powerful government offices and unregulated managers, the Chinese would resent spending their hard-earned dollars in stupid ways. Government-backed financial institutions have been criticized for their poor investments abroad.

One of them has been a laughing stock for trying, on one occasion, to lend a hand to the troubled Bear Sterns, the former investment bank, shortly before it completely folded up its business on the Wall Street.

Buying shares of some international private equity funds has also been criticized for being less prudent than simply placing some Chinese money under their investment management.

The Chinese domestic A-share market is already at a very low point, due largely to some thorny domestic issues. If somehow Chinese financial institutions (some of the largest publicly-listed companies) are reportedly exposed to some new risks overseas, such as owning more bonds and debts, their role in confidence-boosting will be further eroded in China. That would be something least wanted by Beijing.

So how can foreign money, including some sovereign money, join the US rescue effort in a mutually beneficial way - at least without the foreigners feeling being cheated or the locals feeling being offended? When there is hardly any assurance as yet, the picture is still too murky for individual companies to figure out by themselves.

After scanning the world press, one knows even less about the future global financial framework - such as how all the sovereign financial institutions will work together, how to measure the global liquidity and credit situation, how to regulate the global financial futures. This is a time when we are not only running a shortage of insurance, but also of ideas and managerial expertise.

But when the US election is only a month away, it is unlikely the picture will be getting any clearer. As for how much can be done during the following three months until the next administration takes office, many people, with or without liquidity, can only wait and see.

(China Daily October 6, 2008)