No new product safety scandals today, but some potentially encouraging fallout from the various issues concerning substandard goods. The US Food and Drug Administration will open offices in China this week in order to obtain more on-the-ground information on product safety issues while the EU has signed an agreement with Beijing to cooperate on consumer safety. Neither development involves waving a magic wand to rid China of the corner-cutting that tends to be at the root of most scandals.
Bank of America (BoA) did manage to conjure up US$15 billion on to its books three weeks ago (courtesy of the US government, not Harry Potter). We were under the impression this was supposed to be used to boost the bank’s flagging capital levels, and BoA says that’s where the money will go. But BoA has also decided to spend an amount equal to about half that money on boosting its stake in China Construction Bank. If BoA wants to splash more of its cash in China, there may soon be more than enough banks to choose from. The central bank could legalize so-called underground banks in order to widen the credit supply for struggling companies. More money means more investment and more industrial activity. China’s oil companies, which have seen demand for their products fall sharply, would appreciate the stimulus.
Meanwhile, the ball is already rolling on Australia and China’s free trade deal. Now Australian Prime Minister Kevin Rudd and Chinese President Hu Jintao – who enjoyed some face time following the global economic summit at the weekend – have agreed to make it roll even faster.