China hopes the steps the US is taking to stabilize its financial market will bear results soon, President Hu Jintao told his US counterpart George W. Bush over the phone Monday.

The Foreign Ministry said the conversation followed Bush's request a day after the Federal Reserve (Fed) agreed to change its last two major investment banks, Goldman Sachs and Morgan Stanley, to bank holding companies.

Hu told Bush: "We have noticed the US has taken some important measures to stabilize its domestic financial market, and we hope they achieve quick results and improve the economic and financial situation."

The two leaders spoke at the end of a weekend of intensive talks between the Bush administration and the US Congress to hammer out details of a rescue plan. The administration has sought an unprecedented $700 billion to bail out the financial market and prevent the economy from plunging into a deep recession.

Hu said the US plan was both in the interest of the US and China. "It is conducive to maintaining stability in the global financial market and promoting a stable and healthy development of the world economy."

Briefing Hu on the US financial situation, Bush said the American government has realized the seriousness of the financial problem and would take further steps to stabilize the domestic and global markets.

Seven Chinese banks reportedly hold more than $720 million worth of bonds issued by the collapsed investment bank, Lehman Brothers.

But China's capital controls and the overwhelming domestic focus of its banks and insurers have so far largely insulated it from the effects of the Wall Street turmoil.

Nevertheless, a thriving US economy is in great interest of China because it has invested an estimated two-thirds of its $2-trillion foreign exchange reserves in dollar bonds.

China is a big holder of US treasuries and debts issued by the two mortgage giants, Fannie Mae and Freddie Mac, too, which the Bush administration nationalized this month.

Hence, a drastic rise in the US government's debts, which will push down bond prices and/or lower the dollar's value, would mean a huge loss for China.

The financial turmoil has seen many a Wall Street giant being humbled. Lehman went bankrupt, Merrill Lynch was bought by Bank of America, AIG had to be rescued by the US government and Fannie Mae and Freddie Mac were nationalized.

The latest change on Wall Street, undergoing the biggest restructuring since the Great Depression, saw the Fed changing the status of Goldman Sachs and Morgan Stanley from investment banks to bank holding companies.

The change will allow them to open commercial banks that will take deposits and bolster their resources.

The request to change the two investment banks to bank holding companies was granted by a unanimous vote of the Fed's board of governors late on Sunday.

The change also means the two companies will be under the direct regulation of the Fed, which exercises jurisdiction over the country's bank holding companies.

The two institutions' banking subsidiaries will face stricter regulations - the same as commercial banks.

(China Daily September 23,2008)