World shouldn't foot bill for US woes -China paper

BEIJING, Oct 7 (Reuters) - Washington's bailout package for the U.S. financial system is no "magical remedy" for global problems, a leading Chinese state newspaper said on Tuesday, warning the plan could pile pressure on emerging markets.

The front-page commentary in the overseas edition of the People's Daily said the $700 billion rescue approved by Congress last week may help ease paralysed credit markets and give a boost to the softening U.S. economy.

But the commentary also called the plan a double-edged sword that could ultimately bring a "new disaster" by having U.S. citizens and the world foot the bill for Wall Street's crisis.

"The U.S. market rescue plan can only play a temporary stabilising role for the financial market and cannot fundamentally resolve the United States' and the global financial system's problems," the commentary by Shi Jianxun, a professor at Shanghai's Tongji University, said.

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 scepticism about Washington's economic policies and global financial dominance.

The commentary comes against a background of speculation 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 meltdown.

China denied a report in the China Business News that the head of the China Banking Regulatory Commission, Liu Mingkang, had said "China might consider injecting liquidity into the United States to help it save the market".

"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.

The denial came on the heels of a Hong Kong newspaper report 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.

Shi, the Shanghai academic, said Washington's rescue plan would compel the United States to issue a new wave of government bonds or to pump cash into the banking system. This would cause the dollar to fall, exacerbating global inflationary pressures.

"For countries experiencing high inflation, this undoubtedly is a yet another disaster," he wrote. "For emerging market economies, this is an inescapable bind. At the same time as bearing the risk of an economic slide, they must also prepare for the latent threat of incoming inflation."

Other countries should "avoid as far as possible footing the bill the for U.S. bailout, while also joining hands to counter the financial crisis and actively promoting reform of the global financial and currency system that now maintains the hegemonic position of the U.S. dollar," he said. (Reporting by Chris Buckley and Eadie Chen; Editing by Alan Wheatley and Ken Wills)