World shouldn't foot bill for U.S. woes: report

By Chris Buckley

BEIJING (Reuters) - China's banking regulator denied that Beijing might ride to America's financial rescue, while a leading state newspaper said on Tuesday that the world should avoid paying for the United States' own mistakes.

The China Banking Regulatory Commission denied its head, Liu Mingkang, had said "China might consider injecting liquidity into the United States to help it save the market."

The China Business News said Liu made the remarks at a recent World Economic Forum conference in Tianjin, northern China.

"Liu Mingkang has never made such comments anywhere. The story is totally groundless," a CBRC spokesman said in a statement posted late on Monday on the agency's website.

Speculation is swirling that China, with U.S. bonds making up the lion's share of its $1.81 trillion in foreign exchange reserves, the world's biggest stockpile, could have a role to play in any globally coordinated response to the global banking crisis centered on Wall Street.

A Hong Kong newspaper reported on Monday that China was planning to invest another $200 billion in U.S. Treasury bonds. The central bank said it had no information to that effect.

The Chinese-language International Finance News, a newspaper run by the People's Daily, on Tuesday quoted Liu Yuhui, an economist at the Chinese Academy of Social Sciences, as saying the Chinese government was on the horns of a dilemma.

"If China does not participate in the U.S. bailout plan and that causes the financial crises to sweep over the real U.S. economy, then the damage to China will certainly be very great," it quoted Liu as saying.

"China's bind is that if the Chinese government actively participates in the U.S. bailout plan, that will mean the government assumes some of the bailout risk. If the bailout plan is aborted, China may be dragged in even deeper," he added.

"ANOTHER DISASTER"

A front-page commentary in the overseas edition of the People's Daily said the $700 billion rescue approved by Congress last week could play only a temporary stabilizing role and cannot fundamentally resolve U.S. global financial problems.

The commentary by Shi Jianxun, a professor at Shanghai's Tongji University, said Washington's rescue plan would compel the United States to resort to deficit financing that would cause the dollar to fall, exacerbating global inflationary pressures.

"For countries experiencing high inflation, this undoubtedly is a yet another disaster," he wrote.

The People's Daily is the official newspaper of China's ruling Communist Party. The overseas edition is a smaller circulation offshoot of the main paper.

Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent similar comments, amount to a quiet chorus of skepticism about Washington's economic policies and global financial dominance.