Merrill Lynch named a "villain" by a senior Chinese official.
“Some international investment banks are the biggest villains,” said Li Wei, deputy chairman of the agency that oversees China’s biggest state companies, in a commentary in this week’s edition of the Study Times, a newspaper published by the school of the Communist Party’s Central Committee.
The comments were the Chinese government’s most pointed public criticism yet of foreign institutions. Li’s agency said in September it would support companies that want to challenge the contracts in court.
Li said Chinese companies were to blame for most of their losses but complained that derivatives tied oil prices and other matters were too complex and made potential risks too hard to identify.
“Of course, first of all we need to find problems in the companies themselves,” Li wrote in the front-page commentary. “But it also is largely related to international investment banks maliciously peddling high-leverage, complex products with fraudulent characteristics.”
Some 68 of the 136 major banks, airlines and other companies directly controlled by the Cabinet invested in derivatives and recorded book losses totaling 11.4 billion yuan ($1.7 billion) by the end of October 2008, according to Li.
Li made no specific accusations against individual banks. But he noted that airlines and shipping companies bought fuel contracts from Goldman Sachs Group, Merrill Lynch — now a unit of Bank of America Corp. — and Morgan Stanley, while banks bought derivatives from Merrill Lynch, Morgan Stanley and Citigroup.
Spokespeople in China for Goldman and Citigroup declined to comment. Spokespeople for Morgan Stanley and Merrill Lynch did not immediately respond to phone messages and e-mails. – read more at ChinaDaily.com
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