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Morgan Stanley's Langlois May Get Treasury China Post (Update2)

Jan. 30 (Bloomberg) -- John Langlois, a Morgan Stanley banker in China, is a leading candidate to become the U.S. Treasury's attaché in Beijing and help the country take steps to end its currency's peg to the dollar, a person familiar with the matter said.

U.S. Treasury Secretary John Snow announced the new position during a visit to China in September, amid charges by lawmakers and manufacturers that China's currency policy and foreign- investment restrictions give it an unfair trade advantage that costs the U.S. jobs. The attaché will report directly to Snow.

Langlois, 61, is president of Morgan Stanley's Chinese property division. Until returning to China, he was a professor at Princeton University's department for East Asian studies, which he joined in 1999. He previously worked at J.P. Morgan & Co. for 17 years, serving as its managing director and chief representative in Beijing and in various roles in Tokyo, Hong Kong, London and New York.

``Jack Langlois has been doing China for decades, he speaks the language of finance effortlessly in both languages and he really knows his stuff,'' said Robert Kapp, president of the U.S.- China Business Council, a Washington trade group that represents U.S. companies with Chinese operations such as Boeing Co. and Motorola Inc. ``Having somebody like that as a Treasury liaison to the Chinese would be a very good thing.''

China's Importance

Treasury spokesman Rob Nichols said he wouldn't ``comment or speculate on personnel matters.'' Nick Footitt, a spokesman for Morgan Stanley in Hong Kong, said Langlois wasn't available. Footitt declined to comment on whether Langlois was being considered for the Treasury job.

Langlois, who is based in Beijing, has a doctorate in East Asian studies from Princeton, a degree from Harvard in Far Eastern languages and an MBA from New York University.

The new position underscores the importance the U.S. places on closer ties with China, which some U.S. officials and analysts say will challenge Japan as the dominant economic force in Asia in the coming decade.

``China is a rising economic power, and China's policies increasingly have global implications,'' said Fred Hu, chief China strategist at Goldman Sachs Group Inc. in Hong Kong. ``If a well-qualified person is found to fill this new position, the attaché could play a potentially highly constructive role for both China and the U.S.''

Attaché's Task

The Treasury Department's interest in Langlois may not result in his filling the position. Any proposed attaché would have to undergo a background check, and other candidates may be under consideration. The appointment doesn't have to be approved by Congress.

In addition to appointing an attaché for its embassy, the Bush administration has established a group of officials to discuss exchange rates with Chinese counterparts. China has repeatedly said it is committed to moving toward a free-floating currency, without saying when.

The U.S. also is trying to persuade China to ease restrictions on foreign investment and improve its banking system.

The task of the new attaché will be to find ``ways to help China to get a more modern financial system, and in doing so have a more flexible exchange rate and integrate with the world economy more rapidly,'' John Taylor, the Treasury's undersecretary for international affairs, said in an interview earlier this month.

Trade Deficit

While Taylor declined to name candidates in the Jan. 9 interview, he said the Treasury had ``focused on a person with characteristics such as a good knowledge of financial markets, good experience in the private sector and good experience with language in the region.'' The attaché also would report to U.S. Ambassador Clark Randt.

China has kept the yuan fixed at 8.3 to the dollar since 1995. The link means the Chinese currency has tracked the dollar's 10 percent decline in the past year against a basket of six major currencies.

That has erased possible competitive advantages from the weaker dollar for the U.S. and helped swell the U.S. trade deficit with China to a record $13.6 billion last October, drawing protests from lawmakers and manufacturers that China is sucking jobs and demand away from the U.S. economy.

``China must reform its currency practices as a significant step in leveling the playing field for American producers and workers,'' said Patricia Mears, executive director of the Fair Currency Alliance, a group of more than 40 trade associations and labor unions which today retained the law firm Collier Shannon Scott PLLC to bring a complaint against China for manipulating the yuan.

Support for Republicans

Langlois was among executives who briefed Snow on the Treasury chief's tour of China last September and has supported Republican election campaigns, donating $500 to the Republican National Committee in 2002 and $1,000 in 2000, according to Opensecrets.org, Web site of the Center for Responsible Politics, which monitors campaign finance.

The Treasury currently has economic attachés in Buenos Aires, Tokyo, Moscow, Kabul, and at the Organization for Economic Development and Cooperation in Paris.

Earlier today, traders decreased bets China will let the yuan strengthen after a report that a central bank official said there isn't any need this year to adjust the currency's exchange rate or allow it to be traded more flexibly.

Li Yang, a member of China's central bank monetary policy committee, denied any need this year to change the yuan's exchange rate or widen the band within which the currency can fluctuate, the state-run China Securities Journal reported.

The yuan, which is fixed at about 8.3 to the dollar, would rise to 7.8845 in a year if freely traded, forward contracts showed. Such contracts allow investors to bet on the future value of currencies that aren't fully convertible or hedge investments that are denominated in it.

Last Updated: January 29, 2004 15:30 EST