China to increase investing in EU countries
Baku, September 14 (AZERTAC).Chinese Premier Wen Jiabao voiced support for Europe but offered no new specific help for the debt-battered continent, and emphasized China`s own demands that European leaders take "bold steps" to improve economic ties with the Asian giant.
Speaking Wednesday at a World Economic Forum meeting in this northeastern coastal city, Mr. Wen gave the U.S. and Europe a vote of confidence, saying he believes they will overcome their current economic difficulties. He said the focus must now be on preventing the further spread of the European sovereign debt crisis.
"China believes the EU will be able to overcome its difficulties and China remains willing to expand its investment in the EU," Mr. Wen told the audience of global business leaders. "We have on many occasions expressed our readiness to extend a helping hand."
But Mr. Wen gave no indication of what specific support or investments China is prepared to undertake for Europe. And his comments came as current and former advisers to China`s central bank stressed the need for caution in investing in troubled European countries.
Market participants have been looking to China to use some of its massive foreign-exchange reserves—the world`s largest at more than $3.2 trillion—to boost investment in the sovereign debt of economies like Italy and Greece that desperately need to raise new funds. Such hopes pushed up global stock prices Monday after reports that Italian officials met with managers of China`s reserves.
Chinese officials` previous pledges to buy European debt have done little to improve Europe`s woes, and China isn`t likely to ride to the rescue of Italy, analysts say.
The premier`s remarks also highlighted China`s willingness to leverage its position with other countries. He coupled his expression of support for Europe with a reiteration of Beijing`s insistence that European nations grant it "market economy" status, a technical designation that would provide more favorable treatment in certain trade disputes. China is scheduled under World Trade Organization to get the status by 2016, but wants the EU and the U.S. to grant it sooner.
EU leaders "should take bold steps and view relations with China with a strategic vision," Mr. Wen said. Granting market economy status to China early "is the way a friend treats another friend."
Representatives for China`s Foreign and Finance ministries and its central bank all declined to comment on the possible joint action or didn`t respond.
In the past, the four nations—which, with South Africa, form the so-called Brics group of developing economies—have struggled to coordinate policy, and it's unclear if they'll come up with meaningful assistance this time.
Chinese officials have long talked of diversifying their currency reserves, most of which are in U.S.-dollar assets. The state-run Xinhua news agency, in a commentary Wednesday, reiterated that China is buying European bonds to reduce its dependence on the dollar.
But the government`s main investment priority is safety, and Europe`s woes have prompted caution from some influential figures in China. Li Daokui, an academic adviser to the People`s Bank of China, said on the sidelines of the World Economic Forum that China and other potential investors in debt of European governments need to see a "clear commitment and pragmatic policy packages to restructure their public finances, welfare system and economy."
Yu Yongding, a former academic adviser to the PBOC, went further, saying in a statement to Dow Jones Newswires that China shouldn`t buy bonds from individual European countries now without some form of guarantee from the European Union. Instead, he said, China could buy debt issued through the European Financial Stability Facility.
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