WASHINGTON – Confronted with a plunge in its stock markets last year, China’s central bank swiftly reached out to the U.S. Federal Reserve, asking it to share its playbook for dealing with Wall Street’s “Black Monday” crash of 1987.
The request came in a July 27 email from a People’s Bank of China official with a subject line: “Your urgent assistance is greatly appreciated!”
In a message to a senior Fed staffer, the PBOC’s New York-based chief representative for the Americas, Song Xiangyan, pointed to the day’s 8.5 percent drop in Chinese stocks and said “my governor would like to draw from your good experience.”
It is not known whether the PBOC had contacted the Fed to deal with previous incidents of market turmoil. The Chinese central bank and the Fed had no comment when reached by Reuters.
The Chinese market crash triggered steep declines across global financial markets and within a few hours the Fed sent China’s central bank a trove of publicly-available documents detailing the U.S. central bank’s actions in 1987.
Fed policymakers started a two-day policy meeting the next day and took note of China’s stock sell-off, according the meeting’s minutes. Several said a Chinese economic slowdown could weigh on America.
Financial market contagion from China was one of the reasons cited by the Fed in September when it put off a rate hike that many analysts had expected, a sign of how important China has become both as an industrial powerhouse and as a financial market.
China’s vice finance minister said last year Chinese supervisors needed to learn from countries like the United States.
Premier Li Keqiang said last month China’s regulators did not respond sufficiently but China had fended off systemic risks.
U.S. central bankers say their relative transparency helps their effectiveness and legitimacy, but open records laws also make Fed officials cautious about their communications, much of which must be made public when requested. Fed Vice Chairman Stanley Fischer has said transparency makes it harder for policymakers to have informal discussions.
Kamin pointed out in his email that everything he was sending was publicly available.
“I hope this is helpful,” he said.
Full article: China sought urgent advice from Fed to deal with 2015 market plunge (The Japan Times)