China Shares Blame for Crisis, Carney Says

The new Bank of Canada governor, Mark Carney, has blamed China for the subprime mortgage crisis that has rocked the U.S. economy and is being felt around the world. From The Globe and Mail:

By insisting on fixed exchange rates, China and other emerging markets over the years have become a major exporter of capital “to such an extent that they have been significant drivers of lower global long-term interest rates,” Mr. Carney told a full house of Vancouver business people.

Those low rates drove investors to comb the earth in search of higher-yielding investments – a quest that prompted an insatiable appetite for highly structured credit products such as those backed by subprime mortgages.

Those sophisticated and poorly understood products are now the main conduit for contagion of the U.S. slowdown to the rest of the world.

Meanwhile, China Daily reports that Bank of China’s subprime portfolio is reporting that profits from their subprime portfolio are up despite the crisis:

Bank of China (BOC), the largest holder of the US subprime-related assets in the country, will report a “marked” net profit increase for 2007 despite the mortgage crisis influence, its chairman said yesterday.

“We have noticed the subprime crisis is worsening, but I want to say that our subprime portfolio has improved greatly,” the bank’s chairman Xiao Gang said at the opening ceremony of its investment management company in Beijing.

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