TUESDAY, SEPTEMBER 7, 2010
KLMNO
EZ SU ECONOMY & BUSINESS DIGEST MARKETS
U.S. jobs picture spurs rise inworld stocks World stocks rose Monday on
hopes that the U.S. economy can avoid slipping back into reces- sion, although the International Monetary Fund’s chief economist warned of weak growth in the United States and Europe. With U.S. markets closed for
Labor Day, Friday’s encouraging news about the employment pic- ture continued to spill over into tradingMonday. Someinvestors, particularly in
Asia, were catching up with the U.S. jobs numbers, which were
TRANSPORTATION
not as bad as some had feared. Japan’s Nikkei closed up 2.05 percent. Europe’s FTSEurofirst 300
closed slightly higher, up 0.2 per- cent. And MSCI’s all-country world stock index and its Thom- son Reuters counterpart were up more than 0.4 percent at the European close. Thedollarwasgenerallyweak-
er, with the euro rising to its highest in three weeks before easing back.
—Reuters
A11
FENG LI/POOL
From left,National Economic Council Director Lawrence H. Summers and deputy national security adviser Thomas Donilon meet with the minister of the Communist Party’s Central Organization Department, Li Yuanchao, second from right, at the GreatHall of the People.
China:U.S. relations ‘sound’
OFFICIALS MEET IN BEIJING
Both sides seeking to ease tensions
BYWILLIAMWAN
beijing—At a time of tension in U.S.-China relations, a three-day visit by senior U.S. officials to Beijing beganMonday with signs that Chinese leaders want to smooth over some key frictions. “Sound” and “stable” was how
a top Communist Party official described the two countries’ rela- tionship while receiving the U.S. delegation, which included Na- tional Economic Council Director Lawrence H. Summers and depu- ty national security adviser Thomas Donilon. The meeting comes after the
U.S.-China relationship has been battered on several fronts. The United States has fought with China during the past few months over China’s trade sur- plus and currency valuation, with little to show for it. U.S.-South Korea military exercises near the Chinese coast have incensed Chi- nese officials, as did President
Obama’s meeting with the exiled Tibetan spiritual leader, the Dalai Lama, and a U.S. arms sale to Taiwan, both of which happened earlier this year. Rhetoric on both sides has
ratcheted up in recent weeks on national security issues — with China’s state-owned party papers denouncing U.S. interference in South China Sea issues, and Sec- retary of State Hillary Rodham Clinton responding in July at an Association of Southeast Asian Nations meeting that the area is part of her country’s “national interest,” which set off more fum- ing in party papers. On Monday, both sides ex-
pressed hope that meetings be- tween U.S. and Chinese officials scheduled in coming weeks may help thaw some of the recent difficulties. “Although there weresomedis- turbances inChina-U.S. relations, in April and May after President Obama and President Hu Jintao had two meetings, our relations have gotten back on a sound track,” Li Yuanchao, head of the section in the Chinese govern- ment that oversees senior party appointments, said before the closed-door talks began. LaterMonday, according to the
Associated Press, Summers told Vice Premier Wang Qishan that Obama “has emphasized for us
the importance he attaches to a very strong relationship between the United Sates and China.” Among this visit’s top issues, Summers added, is setting up a trip forHu toWashington. Still to come in the next few
months are Chinese PremierWen Jiabao’s visit in a fewweeks to the U.N. General Assembly in New York, a meeting of the U.S.-China Joint Commission on Commerce and Trade and the Group of 20 summit, where additional Chi- na-U.S. talks may occur. Hu is likely to visit the United States in January. Some of the most pressing
issues in this week’s meetings involve the Korean Peninsula, said Shi Yinhong, an internation- al studies professor at Beijing’s Renmin University. There have been icy feelings all around, he said, since the Cheonan, a war- ship belonging to U.S. ally South Korea, was sunk near the border of China’s ally, North Korea. “Neither China nor the U.S.
wants to make a concession on this,” Shi said, “but the two coun- tries also don’t seem to want the relationship to deteriorate again.” Also likely to be much dis-
cussed during this week’s visit is the yuan exchange rate. After heavy U.S. pressure, China pledged in June to change its
stringent control of the yuan, which some believe makes Chi- nese exports cheaper and more competitive because the yuan is undervalued. But, since that pledge, the yuan has hardly budged, rising only 0.6 percent. With the U.S. midterm elec-
tions approaching and the econo- my likely to be a chief topic, pressure is growing in Washing- ton to make progress on the issue of China currency and trade. Sen. Charles E. Schumer (D-N.Y.) and others on Capitol Hill are threat- ening to push legislation this fall that would increase tariffs on Chinese imports. But it’s unclear whether more pressure and talk in the days and weeks ahead will change any- thing. “In the eyes of the Chinese,
American economists are ob- sessed with this exchange rate. That’s all they want to talk about when they visit,” said Andy Xie, a Shanghai-based economist. “But it’s more complicated than that. Given what’s happened so far, I seriously doubt any major change will come from these talks. Even if China’s exchange rate goes up, it won’t be by a lot.”
wanw@washpost.com
Researcher Zhang Jie contributed to this report.
New council of regulators to tackle systemic risks
Group to monitor financial landscape before trouble grows
BY BRADY DENNIS How’s this for a daunting as-
signment: Monitor the entire fi- nancial landscape for risks that could spark another crippling cri- sis. Identify and supervise firms that could pose those systemic risks. And make sure they never grow so large, complex and lever- aged that their failure can wreak havoc across the globe. In a nutshell, that’s themission
of the new Financial Stability Oversight Council, which in com- ingweekswillholdits firstgather- ing to figure out how to accom- plish those lofty goals. Otherprovisions intherecently
passed financial overhaul bill, in- cluding creation of a new watch- dog to protect consumers, have garneredfarbiggerheadlines.But for sheer power and reach, the council of regulators has few ri- vals. “It’s going to set the shape of
U.S. financial regulation, especial- ly for the very largest banks, for years to come,” said Karen Shaw Petrou,managing partner of Fed- eral Financial Analytics, a Wash- ingtonresearchfirm. “It reallywill redefine any institution that’s fin- gered” as systemically important. The group will be led by Trea-
sury Secretary Timothy F. Geith- ner and include the heads of the financial regulatory agencies. It’s 10 voting members include the heads of the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller
“Quite frankly, my experience in the private sector has been that councils are places where people go to opine and pontificate.”
—John W. Thompson, Financial Crisis Inquiry Commission member
of theCurrency. The impetus for the council
grew out of a recognition that, leading up to the financial crisis, no single regulator had the job of watching for risks across the sys- tem. That allowed companies such as insurance giantAmerican International Group to grow so massive and so interconnected with other firms that its downfall in late 2008 threatened to cripple the entire financial system. In a recent speech in Boston,
Deputy Treasury Secretary Neal Wolin said the newcouncil has “a clear responsibility for examining
“I’m glad you’re skeptical. It will put pressure on all of us to make sure that we don’t just, you know, meet every quarter and look at each other. ”
—Sheila Bair, FDIC chairman
emerging threats to our financial system, regardless of where they come from.” To that end, the council will
have the authority to direct regu- lators toissuenewrules regarding capital, liquidity and leverage lev- els and to impose more onerous rules on firms that it deems to be systemically important. As a last resort, the council can
agreebyatwo-thirdsvote tobreak up large, complex firms if mem- bers agree that they pose a grave threat to the country’s financial stability. Council members will have at
their fingertips another newenti- ty, the Office of Financial Re- search, which will be staffed with economists, accountants and oth- er specialists to help collect and analyzereamsof real-timedata, in hopes of identifying emerging threats to the financial system. The group, which by law must
meetwithin90days of July 21, the day President Obama signed the overhaul bill, is expected to sup- plant the President’s Working Group, which was established by executive order by PresidentRon- ald Reagan after the “BlackMon- day” stock crash in October 1987. That group,which included some of the same officials, played a largely advisory role. In a hearing last week before
the Financial Crisis Inquiry Com- mission, FDIC Chairman Sheila Bair saidshehopedthenewcoun- cilwouldbecome“aforward-look- ing forum” that can halt systemic risks “before they result in dam- age to our economy.” But commission member John
W. Thompson expressed skepti- cismabout how effective the new councilwill be. “Quite frankly, my experience
in the private sector has been that councils are places where people go to opine and pontificate, and nothing ever gets done,” he said. “Why should we believe that his council is going to be uniquely different and keep us out of trou- ble?” “I’mglad you’re skeptical,” Bair
responded. “It will put pressure on all of us to make sure that we don’t just, you know, meet every quarter and look at each other. . . . Wehave ownership. Ifwedon’tdo our job, then we should be held strongly accountable.”
dennisb@washpost.com
JASON ALDEN/BLOOMBERG NEWS Underground employees are expected to strike over pay and job cuts.
French railway, London subway disruptions Rail and air service in France
will be sharply cut back Tuesday in response to a national strike by trade unions to protest plans to raise the retirement age. And in a separate protest, London’s Un- derground rail network also faced major disruption Tuesday. Both strikes were to last 24
hours. The French protest coincides
with the start of debate in parlia- ment over a plan to overhaul the money-losing pension system so it will break even in 2018. Presi- dent Nicolas Sarkozy’s govern- ment says the reform is essential because people live longer, and it has urged residents to show “courage” as it tries to chip away at the huge national debt. France’s SNCF state railway company said that intercity and
PHILANTHROPY Wealthy Chinese to skip Gates-Buffett event
A number of wealthy Chinese individuals have reportedly de- clined to attend an event hosted by billionaires Bill Gates and Warren Buffett because of con- cerns that they would be asked to give their money to charity. The Beijing-based Economic
Observer newspaper reported Thursday that “a small number” of wealthy Chinese declined an invitation to attend a private gathering with the twomenin the capital. Gates and Buffett, respectively
the world’s second- and third- richest people, will publicly ex- plain this week the purpose of their visit and detail why they have invited the billionaires to
ALSOINBUSINESS
l British panel says to pull Avan- dia: British drug regulators have urged that GlaxoSmithKline’s controversial diabetes pill Avan- dia be pulled from the United Kingdom market because of con- cerns that the drug can increase the risk of heart attacks. An inde- pendent panel of experts con- cluded that the risks of Avandia outweigh its benefits, and that it should no longer be sold in Brit- ain, the Medicines and Health- care Products Regulatory Agency said. The BritishMedical Journal also called for the immediate withdrawal of the drug, saying it should never have been licensed. Avandia was approved by the European Medicines Agency to
help lower blood sugar levels in patients withType2diabetes.The EMA has scheduled a meeting on the drug’s safety for this week.
l FDA pauses on ProAmatine: Federal regulators have backed off a plan to remove a low-blood pressure treatment from the mar- ket after warning last month that the drug has not been proved effective. The Food and Drug Ad- ministration will continue to al- low access to ProAmatine, also known as midodrine, “while the necessary data is collected and the legal issues get sorted out,” spokeswoman Sandy Walsh said in an e-mail.
—From news services
J.B. REED/ BLOOMBERG NEWS
British drug regulators have urged that the diabetes pill Avandia be pulled because of concerns that it can increase the risk of heart attacks.
jointhemat theendof the month, a press officer for the Bill and Melinda Gates Foundation’s Bei- jing office said by phone Sunday. Gates and Buffett have an-
nounced their desire to press billionaires to pledge at least half of their fortunes to charity. Buffett is a director and advis-
er of The Washington Post Co., and he is chief executive of Berk- shire Hathaway, which is one of the largest shareholders in The Post Co. Gates’s wife, Melinda, is a co-
founder of the Gates Foundation and a member of The Post Co.’s board of directors. —Bloomberg News
local train services would be re- duced by 50 percent or more but that Eurostar links with Britain should run normally. Air France said that short- and medium-haulflightswouldbecut to 50 percent Tuesday at Orly airport, south of Paris, and to 90 percent at Charles de Gaulle air- port, northeast of the capital, but that long-haul service should be unaffected. In England, as many as 10,000
London Underground drivers, station staff and engineers — a majority of the workforce — are expected to strike over pay and job cuts. Unions say they will follow the one-day strike with three more before the end of November.
—From news services
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