‘China will refrain from saving the Euro’

[JayAtl]

Population plays a very big role in this you know.

the disparity is beyond taking the population gap metrics. ...

 

[ChinaToday]

China is very likely to contribute to the eurozone’s bail-out fund but the scope of its involvement will depend on European leaders satisfying some key conditions, two senior advisers to the Chinese government have told the Financial Times.

Any Chinese support would depend on contributions from other countries and Beijing must be given strong guarantees on the safety of its investment, according to Li Daokui, an academic member of China’s central bank monetary policy committee, and Yu Yongding, a former member of that committee.

Financial markets reacted with relief hours after a European deal was agreed at a summit aimed at calming the two-year-long sovereign debt crisis. The plan includes recapitalising European banks, making them accept a loss of 50 per cent on their holdings of Greek debt and boosting the firepower of the rescue fund, known as the European Financial Stability Facility.

The S&P 500, which rose 3.4 per cent, is on course for its best monthly gain since October 1974. The FTSE All World stock index gained 4.1 per cent, its best one-day rise since May 2010.

Bank stocks also increased sharply with the S&P financials index gaining 6.2 per cent, led by big commercial banks. The dollar slumped 1.6 per cent, its biggest one-day drop since May 2009, as the euro surged more than 2 per cent, above $1.42.

“It is in China’s long-term and intrinsic interest to help Europe because they are our biggest trading partner but the chief concern of the Chinese government is how to explain this decision to our own people,” said Professor Li. “The last thing China wants is to throw away the country’s wealth and be seen as just a source of dumb money.”

He added that Beijing might also ask European leaders to refrain from criticising China’s currency policy, a frequent source of tension with trade partners. The US argues that an intentionally undervalued renminbi unfairly supports Chinese exports.

In spite of discomfort among some Europeans about Chinese investment, the comments represented a fillip to eurozone leaders hours after a summit aimed at calming the two-year-long sovereign debt crisis.

With $3,200bn in foreign exchange reserves, roughly a quarter of which are believed to be held in euros, China could be willing to contribute between $50bn and $100bn to the EFSF or a new fund set up under its auspices in collaboration with the IMF, according to one person familiar with the thinking of the Chinese leadership.

“If conditions are right then something a bit above $100bn is not inconceivable,” this person said.

President Nicolas Sarkozy of France welcomed the prospect of a Chinese contribution to the eurozone rescue package. “Our independence would not be put into question by this,” he said in a television interview. “Why would we not accept that the Chinese had confidence in the eurozone and place a part of their surpluses in our funds or our banks. Would you rather they placed it with the US?”




Klaus Regling, head of the EFSF, was due to arrive in Beijing late on Thursday for discussions with senior Chinese leaders on whether and how much China might contribute. President Sarkozy telephoned his Chinese counterpart Hu Jintao a few hours after the summit ended to discuss the rescue plan but there was no immediate announcement on any Chinese involvement.

European leaders agreed that the EFSF would explore two plans to increase its remaining firepower from about €250bn to €1,000bn. One would be to offer investors insurance on selected government debt while the other would create a special fund in which countries such as China could invest.


beyondbrics

Chinese companies are increasing their appetite for corporate acquisitions in Europe

One condition China might ask for is that its contribution be at least partly denominated in renminbi, which would protect its investment against currency fluctuations. China would buy euro-denominated bonds but repayments would compensate for any changes in the value of the renminbi, which has appreciated nearly 20 per cent against the euro in the past three years.

Reflecting the unease in Europe, the head of Germany’s industry association said he feared Chinese help could “come at some political cost”. Hans-Peter Keitel told the FT: “Asking a non-eurozone nation to help the euro would give the other nation the power to decide the fate of the single currency.”

The global focus on how China might contribute to the European rescue plan illustrates its increased influence on the world stage and many in Beijing believe this crisis presents an opportunity for it to display global citizenship and responsibility commensurate with its rising status.

Beijing’s main concern is how any contribution to a European bailout will be viewed domestically by an increasingly informed and critical populace.

“Any mis-steps in helping Europe could cause problems with domestic public opinion – the Chinese people will watch very carefully what their own government does,” Prof Yu said. “European leaders also must have a clear plan of what to do and they must show China they have the political will as well as the support of their own people; if we see protests and chaos all the time, then China won’t have confidence in Europe’s political ability.”


China could play key role in EU rescue - FT.com

---------- Post added at 06:21 AM ---------- Previous post was at 06:19 AM ----------

Why China Should Bail Out Europe

EUROPE is drowning and needs a lifeline. A series of marathon meetings this week yielded a new set of proposals, but what they depend on is cash — and lots of it, perhaps trillions of dollars — to save Greece and the European banking system and to prevent financial contagion from spreading to Spain, Italy and even France, which would destroy the euro zone as we know it. Where to turn for help? The answer is obvious: China.

Indeed, the call by President Nicolas Sarkozy of France this week to President Hu Jintao of China, seeking support for the European Financial Stability Facility, could represent a major change in the global landscape: the consolidation of China’s economic dominance at the expense of the status quo powers — the United States and Europe.

Despite the agreement among Europe’s leaders on Thursday to recapitalize banks on the Continent, the reality is that Europe cannot muster this cash on its own. In part, this is because most countries are fiscally stretched and even Germany, with a debt-to-gross domestic product ratio above 80 percent, is reaching the limits of its check-writing ability. But it is also because Germany seems reluctant to transfer resources, either directly through fiscal means or indirectly through the European Central Bank.

And with a United States essentially sidelined because of its own economic and fiscal weakness, it is even less of a surprise that the S O S is going out to China. Only China, with its $3 trillion in reserves, is now able to provide the magnitudes of relief that Europe desperately needs.

What should China do? So far, it has opted not to be an active financier of the European countries threatened by crisis. But that is increasingly becoming a less tenable position. China is the world’s major exporter, and averting economic collapse in the indebted importing countries of Europe will be very much in China’s interest.

But China has a choice. It can help Europe bilaterally by back-stopping the stability facility, as Europe has requested, or by guaranteeing to buy Italian and Spanish bonds at a rate that would keep these countries’ finances sustainable (much as the European Central Bank ought to be doing). Or it can help by providing the International Monetary Fund with additional money to, in turn, lend to Europe.

From China’s perspective, the possible advantage would be to exert power to obtain direct and concrete benefits. For example, it could ask for market economy status in Europe, which would reduce the scope for protectionist action against Chinese goods entering the European market. It could also seek to buy companies in distressed countries on advantageous terms.

The risks in this bilateral approach are considerable. It would expose China to the charge of becoming enmeshed in European politics. Domestically, it would expose the government to the charge of privileging foreign investment at the expense of investing in what is still a poor country with great development needs and challenges.

Helping Europe by strengthening the I.M.F. and increasing its lending would avoid some of these political costs, especially since China would not be directly involved in European politics and problems. But China would have to receive something considerable in return for the extra resources that it would be providing.

China should demand nothing less than a wholesale revamping of the governance of the I.M.F. to reflect the current economic realities. Governance reform can no longer be just about the nationality of the I.M.F.’s managing director but should fundamentally be about who will have the greatest voice and exercise the most power in the new world.

Today, the United States and Europe each have effective veto power in the I.M.F. because important decisions require an 85 percent share of the vote. If China were to become the I.M.F.’s major financier it should have veto power on terms equivalent to those of the United States. Europe’s power should be reduced commensurate with its transition from creditor to potential borrower status. Supplicants, China should insist, cannot have veto power in a financial institution.

The Chinese government could then trumpet a nationalist achievement — equal status as the United States, and a greater status than that of Europe, in running the world’s premier financial institution — as the return for investing its cash abroad.

These demands would be legitimate and indeed be welcome for the world because they would tether China more firmly to, and create a stake for it in, the multilateral system. Those in the United States and Europe who would resist these changes should remember that the alternatives are worse. A China that uses its might bilaterally to gain narrow political advantages would be a worrying portent for the future when China becomes economically bigger and stronger. And a China that refuses to take the phone call at all could well push Europe off the cliff. Europeans are running out of options; debtors cannot be choosers.

http://www.nytimes.com/2011/10/28/opinion/europe-should-look-to-china-for-financial-help.html

 

[Chinese-Dragon]

It is unfortunate that the Eurozone is looking outside of Europe, for people to help them with their problems.

To exist as an entity, the Eurozone needs to demonstrate that they can support themselves. Germany for example, has more than enough money to save the the Eurozone if necessary, they just don't want to do it. Not that I blame them, why should they pay for other people's mistakes?

 

[Obambam]

It is unfortunate that the Eurozone is looking outside of Europe, for people to help them with their problems.

To exist as an entity, the Eurozone needs to demonstrate that they can support themselves. Germany for example, has more than enough money to save the the Eurozone if necessary, they just don't want to do it. Not that I blame them, why should they pay for other people's mistakes?

Yes, unfortunately for them, they are a member state so they are obliged to help or risk getting dragged deeper by countries that are failing. There is not much time for the blame games (I know they are all pointing fingers at Greece right now). China should help them, but not without conditions. It is about time for the stubborn heads to consider lifting the embargo and work more closely with China.

 

[bandit]

China does not really want the euro to collapse. If Euro collapse now US and China will be the beneficiaries but US being alot closer will take most of the benefits. Not to mention afterwards US will turn its complete focus on the yuan.

How so?

USA: It is rather obvious that the most integrated market with the USA is europe. Bulk of capital transfer happens between these two and the banks are totally interconnected. How will USA benefit from a collapse of its banking system? It will be a re-run of 2008 all over again.

China: Guess who Chinas top trading partner is? Europe.
Similar to the US, China has a stake in helping out Eurozone not because of being a good samaritan, but to maintain its trading interests.

US has not been the only one complaining about the yuan con job. EU has voiced its concerns as well.

After all, most of the money China is sitting on can be attributed to predatory currency practices, why not use it to help where it came from?

China wants the euro to survive for now but they want technology exchange in a few high end areas, hence China official's recent visit to Europe to discuss the deal (which fell through). Europe does not want to sell the few remaining lead in technology it has because it knows that it's the only remaining card to hase to prevent it's industry from being out-competed by China.

So you want Europe to give up its hard work in maintaining the techological lead in trade for a loan that can be argued is europes money to begin with?
What is the Guarantee that all the European technology will not be copied and all IP rights thrown down the drain. China lost its credibility in this area are long time ago, I doubt anyone trusts them enough to share knowledge with them.

why dont they ask india to help ? India is predicted by them to over take china next year

Because Indian government is not sitting on a useless pile of money that loses its value over time. Only China is doing that currently hence the expectation to put that money to some use.

 

[Nomenclature]

So you want Europe to give up its hard work in maintaining the techological lead in trade for a loan that can be argued is europes money to begin with?
What is the Guarantee that all the European technology will not be copied and all IP rights thrown down the drain. China lost its credibility in this area are long time ago, I doubt anyone trusts them enough to share knowledge with them.

That's the point of trade. Intellectual property is just like any other sort of property. If you're not prepared to give something of value in return, just don't ask for money.

 

[Chinese-Dragon]

Because Indian government is not sitting on a useless pile of money that loses its value over time. Only China is doing that currently hence the expectation to put that money to some use.

Useless pile of money?

China's currency reserves at $3 trillion, are worth almost double the entire Indian GDP ($1.5 trillion)

 

[fallstuff]

Why would anybody buy these so called troubled assets, or loan them more money. 50% has been written off by the creditors.

 

[no_name]

How so?

USA: It is rather obvious that the most integrated market with the USA is europe. Bulk of capital transfer happens between these two and the banks are totally interconnected. How will USA benefit from a collapse of its banking system? It will be a re-run of 2008 all over again.

China: Guess who Chinas top trading partner is? Europe.
Similar to the US, China has a stake in helping out Eurozone not because of being a good samaritan, but to maintain its trading interests.

It is actually going to take a lot of effort to explain this so we'll just watch how it plays out.

US has not been the only one complaining about the yuan con job. EU has voiced its concerns as well.

After all, most of the money China is sitting on can be attributed to predatory currency practices, why not use it to help where it came from?

Most of the money China is sitting on comes from the hardwork of millions of Chinese citizens.
You want to see predatory money practices? There are some sort of occupy something rallies going on right now.

So you want Europe to give up its hard work in maintaining the techological lead in trade for a loan that can be argued is europes money to begin with?

You don't claim ownership to things by claiming to be more moral than others, Ownership is achieved by actually owning them.

What is the Guarantee that all the European technology will not be copied and all IP rights thrown down the drain. China lost its credibility in this area are long time ago, I doubt anyone trusts them enough to share knowledge with them.

If China buys those IP transfers from Europe, it is a transaction. Copy should not be seen a negative thing if it comes from brought IPs. Copy does not equals pressing buttons and zero effort. Imitation must always come before learning and creating. The only way to learn from something is to go through that same process yourself. As Feynman puts it: what I cannot create I do not understand.

Because Indian government is not sitting on a useless pile of money that loses its value over time. Only China is doing that currently hence the expectation to put that money to some use.

We'll begin to see how useful these useless piles of money are soon.

 

[raavan]

Despite China being perhaps the only country with sufficient cash reserves to help the EU out of its crisis, the head of a Hong Kong-based investment company does not believe it will get involved at this stage.

*France’s move to have the EU print more money in order to deliver Greece’s 100-billion-euro austerity package was vetoed by Germany. So the EU is left with no choice but to find real money, Francis Lun, managing director at Lyncean Holdings, told RT.

“And there are not a lot of places in the world with real money today,” he added, “And China has $3 trillion of foreign exchange reserves, so it was envisioned in a leading role in saving the euro”.

“When they [the EU] run out of money, they go to China and say please give us your foreign exchange reserve to solve the problem. But I doubt China has to play that role. It should be played by Germany, France and the EU. If you don't have money – sell your assets or raise some taxes like the US does. They will refrain from playing a leading role in saving the euro,” Lun said.

Lun believes China will hold back despite having much to gain from helping Europe in terms of “political leverage and influence.”

“When you look around the world, both the EU and the US are in deep crisis and China is the only country that is not in a financial crisis and has a huge foreign exchange surplus. China can use this money and build up a political connection and influence, so that in future in foreign policy the EU will stand on the side of China, instead of against,” Lun concludes.

Let me give you it simple and in a nut shell : Start spending less than you have.

I didnt know LUN was supposed to talk

 

[Hussein]

Foreign-exchange reserves - Wikipedia, the free encyclopedia
China is very dependant on US dollar
Maybe they want as well more invest in another currency

don't forget the main market of China is not USA but Europe
If Europeans buy less chinese products it will affect chinese economy

Again seems some people don't understand what is happening in Europe.
First point this is all to save Greece , a country which was cheating when they entered in Europe and gave fake data about their economy. The people cheat the taxes so the country is missing so much income.
Europe decided to decrease the debts by half. Let's see if it can help.

Second point is that for exemple France: 30 years ago, the country started to make a debt
very small then more and more
Now if you check the debt of the country:
check the balance: the country is spending 40 billions more than its income
and you know what is the 40 billions? the cost of the interest of the debt
so if it was not this debt of the past there would equilibrum

anyway europe is trying to solve it. people are very worried here.

 

[Unbeliever]

It is really funny that some of you guys talk about this as if it was charity. China will contribute because it is in their self-interest, not because they want to "help" Europe..

See
http://www.spiegel.de/international/europe/0,1518,794575,00.html
for a little more info. There is more as laid out by the articles China Today posted.

why dont they ask india to help ? India is predicted by them to over take china next year

Rofl.. no its not. Maybe by astrologists but no economists in Germany "predict" that.. and I would wager neither do any serious European economists. Your rivalry makes you imagine things.

China is actually "predicted" to catch up to the US between 2016 and 2025 by many economists here.

 

[bandit]

That's the point of trade. Intellectual property is just like any other sort of property. If you're not prepared to give something of value in return, just don't ask for money.

Point of trade is to steal and copy illegally?

I don't think you meant that.

Useless pile of money?

China's currency reserves at $3 trillion, are worth almost double the entire Indian GDP ($1.5 trillion)

Good for you. Why is China not using that money usefully? I am sure keeping it locked away where it is constantly losing value is not the best use of your money.

It is actually going to take a lot of effort to explain this so we'll just watch how it plays out.

Whch part takes a lot of effort? The exlanations up there if you care to go through it. Its not rocket science.

Most of the money China is sitting on comes from the hardwork of millions of Chinese citizens.
You want to see predatory money practices? There are some sort of occupy something rallies going on right now.

Are you suggesting that lower paid Chinese workers work harder than other workers?
If the monetary policy is not managed by China as currently they wont have any work.

You don't claim ownership to things by claiming to be more moral than others, Ownership is achieved by actually owning them.]

Well then you should work harder to own them and not copy or steal right?

If China buys those IP transfers from Europe, it is a transaction. Copy should not be seen a negative thing if it comes from brought IPs. Copy does not equals pressing buttons and zero effort. Imitation must always come before learning and creating. The only way to learn from something is to go through that same process yourself. As Feynman puts it: what I cannot create I do not understand.

You nailed it . China buys the products, not their IP rights. But anyways large scale copy does take place which is illegal. The production of high technology goods is limited to assembling in China. I am sure you have seen the iphone break-up by now.


]

We'll begin to see how useful these useless piles of money are soon.

Amen. Lets put money to some good use.

 

[Nomenclature]

Point of trade is to steal and copy illegally?

I don't think you meant that.

Oh, so Google is engaging in stealing and copying illegally when it bought Motorola for its IP library?

Are you suggesting that lower paid Chinese workers work harder than other workers?
If the monetary policy is not managed by China as currently they wont have any work.

Chinese workers still have plenty of work even their wages is far higher than those in most of South and Southeast Asia.

"KPMG says that minimum wage levels in China are four times greater than other places in South and South East Asia.

However, it believes China can defend its position because of its productivity and infrastructure."

BBC News - China minimum wage up by 21.7% despite economic cooling

Well then you should work harder to own them and not copy or steal right?

You seem to be incapable of understanding the whole point of money and capitalism is people can do different works and acquire fruits of other's labor by trading and exchange. I'm sure you're not growing all your food, generating all your electricity and making all your computer, so by your reasoning you must be copying or stealing them, right?

 

[no_name]

This debate is going no where, because there are double standards and we can spend a lot of effort just arguing over fluffy details and definitions. Anybody with clear eyes should just wait and see.