China sovereign wealth fund exec bets dollar goes lower

By Alan Wheatley
Reuters
Monday, December 8, 2008

http://www.reuters.com/article/marketsNews/idUSPEK35408020081208

BEIJING -- One of the top managers of China Investment Corp., the country's $200 billion sovereign wealth fund, reckons current dollar strength is temporary and he would like to bet that the U.S. currency is headed lower.

CIC President Gao Xiqing was speaking in an interview with monthly U.S. magazine The Atlantic two weeks before the Nov. 4 U.S. election. The euro was trading at that time between $1.30 and $1.35. On Monday it stood around $1.2765.

"Everyone is saying, 'Oh, look, the dollar is getting stronger!' I say, that's really temporary. It's simply because a lot of people need to cash in, they need U.S. dollars in order to pay back their creditors. But after a short while, the dollar may be going down again. I'd like to bet on that!" he said.

To read the article:

http://www.theatlantic.com/doc/200812/fallows-chinese-banker

Gao said U.S. officials did not directly consult China directly about the $700 billion financial rescue plan enacted in October.

"We were talking to people there, and they were hoping that we would be supportive by not pulling out our money," he said.

"We know that by pulling out money, we're not serving anyone's good. Including ourselves. So we're trying to help, at least by not aggravating the problem," Gao added.

He said the United States needed to come up with a long-term sustainable financial policy and Americans had to be told they must save after having lived beyond their means for too long.

Gao, an ebullient, fluent English speaker, said the current generation of Americans was so used to U.S. supremacy that it might hurt them to treat others on an equal footing.

But he said: "The simple truth today is that your economy is built on the global economy. And it's built on the support, the gratuitous support, of a lot of countries. So why don't you come over and. ... I won't say kowtow [with a laugh], but at least, be nice to the countries that lend you money."

Asked what might prompt China to start running down its dollar assets -- something he said would hurt "in the short term" -- Gao answered:

"Today when we look at all the markets, the U.S. still is probably the most viable, the most predictable. I was trained as a lawyer, and predictability is always very important for me."

Gao took aim at the high salaries on Wall Street.

"I have to say it: you have to do something about pay in the financial system. People in this field have way too much money. And this is not right," he said.

Gao recalled that he earned $60,000 in his first year as a lawyer in America after graduating from North Carolina's Duke University in 1986. "I thought it was astronomical!" he said.

When he returned to China in 1988, his first month's salary was 59 yuan -- $8.60 at today's exchange rate.

"The thing is, we are working as hard as, if not harder than, those people. And we're not stupid. Today those people fresh out of law school would get $130,000, or $150,000. It doesn't sound right.

"Individually, everyone needs to be compensated. But collectively, this directs the resources of the country. It distorts the talents of the country," he said.

* * *

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at http://www.gata.org/.