Monday September 8 2008
BEIJING, Sept 8 (Reuters) - The U.S. Treasury's takeover of Fannie Mae and Freddie Mac is good news in the short term for China, the biggest holder of the giant mortgage lenders' debt, but Beijing's huge U.S. exposure still poses a serious risk, a prominent government researcher said on Monday.
The seizure of the two firms, prompted by worries over their shrinking capital, was the latest in a series of emergency steps taken by
But, taking a longer view, he said the bailout posed a problem: if the Treasury issues new debt to fund the rescue, should
The Treasury's equity stake could reach $100 billion in each of the lenders, which own or guarantee almost half of
He said the takeover was the last resort for the
"This shows that the risks involved are greater than we thought. As such, Chinese banks should be cautious and prudent," the researcher added.
Bank of China said on Aug. 29 it had slashed its exposure to Fannie and Freddie to $12.67 billion as of Aug. 25 from $17.3 billion at the end of June.
Vice-Premier Wang Qishan, who is in overall charge of economic and financial policies, did not comment directly on the two agencies' woes. But, speaking in the southern city of
Although the takeover of the mortgage lenders was a reminder of the investment risks
Buying non-government dollar bonds would be even riskier, while the euro is expensive and yields in
"If we don't buy
There was a vigorous reaction among Chinese Internet users.
A blogger on www.163.com said "a capitalist country is now acting to save the market and protect investors", whereas
"How can Chinese stock investors not be sad? How can they not lose confidence?" the post said.