Prime Minister Wen Jiabao said Thursday that China was considering whether to work with the International Monetary Fund to play a greater role in financing Europe’s efforts to end a sovereign debt crisis, but he left it unclear whether China was willing to drop conditions that would make its help unappealing for European countries.
Mr. Wen, speaking at a press conference in Beijing after a meeting with Chancellor Angela Merkel of Germany on the first day of her three-day visit to China, said that officials were studying whether China should be “involving itself more” in Europe’s debt troubles through investments in the European Financial Stability Facility and the European Stability Mechanism. This could be done through the I.M.F., he said.
One idea under consideration by China in recent months is whether it could lend money to the I.M.F., which would then lend it to Europe. This would transfer the risk of a European default to the I.M.F.
Russia embraced this approach in December, but was willing to lend only $20 billion. China had $3.18 trillion in foreign exchange reserves at the end of December, dwarfing the reserves of every other country and potentially giving it the financial power to make a much bigger contribution.
Mrs. Merkel is the first of several European leaders scheduled to visit China this month, the latest in a series of signs that China’s huge foreign exchange reserves have begun to give it financial influence to rival Washington’s.
A clear Chinese priority has been to prevent a slump in the value of the euro against the renminbi, which would make Chinese goods less competitive in Europe, China’s largest export market. “China supports Europe in safeguarding the stability of the euro,” Mr. Wen said.
Germany has joined the United States in the past in supporting a stronger renminbi, but Mrs. Merkel was circumspect on the subject Thursday, saying that she supported the Chinese goal of working together to make the renminbi more convertible.
Christine Lagarde, the managing director of the I.M.F., has been playing a prominent role in trying to broker an agreement that will satisfy creditor countries like Germany and debtor countries like Greece, including a possible plan to convert the temporary €440 billion, or $577.8 billion, European Financial Stability Facility into a permanent €500 billion fund.
European officials have been approaching China off and on for two years, looking for the Chinese government to diversify and increase the roughly one-quarter of its foreign exchange reserves that are believed to be held in euros, mostly in government bonds issued by the financially strongest countries in Europe.
Economists and officials with detailed knowledge of China’s position have said repeatedly that China would be happy to help, but only if its loans could be made essentially risk-free. One way to do this would be to have each European country agree to repay the loans even if others default.
But Germany has been leery of any arrangement that could make it the guarantor of other European countries’ liabilities, and there has been little sign that this has changed.
European officials have nonetheless kept raising the possibility that China might lend assistance. This may have discouraged speculators from placing even heavier bets against the government bonds of financially weak countries like Greece, Italy, Spain, Portugal and Ireland.
Chinese officials signaled in November and early December that they were wary of helping Europe, noting publicly that the country’s foreign exchange reserves had been financed with money borrowed from the Chinese people and suggesting that it might be safer to invest it in infrastructure projects overseas instead of government bonds.
Economies in Europe seemed in some ways more in danger then, as manufacturing has seemed to rebound since then and the European Central Bank has revealed since then that it has been making massive, three-year loans to European commercial banks at extremely low interest rates. But Greece has also been struggling to raise the money for bond payments due next month, making the financial negotiations in Europe more urgent.
Another big question is what kind of political or trade concessions China might be able to wrest from Europe in exchange for assistance.
Mr. Wen suggested last September that the European Union could dismantle its legal protections against low-priced Chinese exports, an idea that was immediately condemned by European trade officials.
An op-ed column on Thursday in the official China Daily newspaper raised Mr. Wen’s trade proposal again and suggested that the Union could make political concessions, like lifting a longstanding ban on arms exports to China, in exchange for Chinese financial assistance. “As a Chinese saying goes, one does not visit the temple for nothing,” the column warned.
http://www.nytimes.com/2012/02/03/b...id-in-europes-debt-crisis.html?_r=1&ref=china
What's left is for China to have another 1989 for the EU to freeze these sweatshop savings.
Mr. Wen, speaking at a press conference in Beijing after a meeting with Chancellor Angela Merkel of Germany on the first day of her three-day visit to China, said that officials were studying whether China should be “involving itself more” in Europe’s debt troubles through investments in the European Financial Stability Facility and the European Stability Mechanism. This could be done through the I.M.F., he said.
One idea under consideration by China in recent months is whether it could lend money to the I.M.F., which would then lend it to Europe. This would transfer the risk of a European default to the I.M.F.
Russia embraced this approach in December, but was willing to lend only $20 billion. China had $3.18 trillion in foreign exchange reserves at the end of December, dwarfing the reserves of every other country and potentially giving it the financial power to make a much bigger contribution.
Mrs. Merkel is the first of several European leaders scheduled to visit China this month, the latest in a series of signs that China’s huge foreign exchange reserves have begun to give it financial influence to rival Washington’s.
A clear Chinese priority has been to prevent a slump in the value of the euro against the renminbi, which would make Chinese goods less competitive in Europe, China’s largest export market. “China supports Europe in safeguarding the stability of the euro,” Mr. Wen said.
Germany has joined the United States in the past in supporting a stronger renminbi, but Mrs. Merkel was circumspect on the subject Thursday, saying that she supported the Chinese goal of working together to make the renminbi more convertible.
Christine Lagarde, the managing director of the I.M.F., has been playing a prominent role in trying to broker an agreement that will satisfy creditor countries like Germany and debtor countries like Greece, including a possible plan to convert the temporary €440 billion, or $577.8 billion, European Financial Stability Facility into a permanent €500 billion fund.
European officials have been approaching China off and on for two years, looking for the Chinese government to diversify and increase the roughly one-quarter of its foreign exchange reserves that are believed to be held in euros, mostly in government bonds issued by the financially strongest countries in Europe.
Economists and officials with detailed knowledge of China’s position have said repeatedly that China would be happy to help, but only if its loans could be made essentially risk-free. One way to do this would be to have each European country agree to repay the loans even if others default.
But Germany has been leery of any arrangement that could make it the guarantor of other European countries’ liabilities, and there has been little sign that this has changed.
European officials have nonetheless kept raising the possibility that China might lend assistance. This may have discouraged speculators from placing even heavier bets against the government bonds of financially weak countries like Greece, Italy, Spain, Portugal and Ireland.
Chinese officials signaled in November and early December that they were wary of helping Europe, noting publicly that the country’s foreign exchange reserves had been financed with money borrowed from the Chinese people and suggesting that it might be safer to invest it in infrastructure projects overseas instead of government bonds.
Economies in Europe seemed in some ways more in danger then, as manufacturing has seemed to rebound since then and the European Central Bank has revealed since then that it has been making massive, three-year loans to European commercial banks at extremely low interest rates. But Greece has also been struggling to raise the money for bond payments due next month, making the financial negotiations in Europe more urgent.
Another big question is what kind of political or trade concessions China might be able to wrest from Europe in exchange for assistance.
Mr. Wen suggested last September that the European Union could dismantle its legal protections against low-priced Chinese exports, an idea that was immediately condemned by European trade officials.
An op-ed column on Thursday in the official China Daily newspaper raised Mr. Wen’s trade proposal again and suggested that the Union could make political concessions, like lifting a longstanding ban on arms exports to China, in exchange for Chinese financial assistance. “As a Chinese saying goes, one does not visit the temple for nothing,” the column warned.
http://www.nytimes.com/2012/02/03/b...id-in-europes-debt-crisis.html?_r=1&ref=china
What's left is for China to have another 1989 for the EU to freeze these sweatshop savings.
