China’s state media says their cash-rich country won’t save Europe
China’s state media Sunday warned that the country will not be a “savior” to Europe, as President Hu Jintao left for an official visit to the region including a G20 summit.
Hu’s visit has raised hopes that cash-rich China might make a firm commitment to the European bailout fund, but in a commentary, the official Xinhua news agency said Europe must address its own financial woes.
“China can neither take up the role as a savior to the Europeans, nor provide a ‘cure’ for the European malaise.
“Obviously, it is up to the European countries themselves to tackle their financial problems,” it said, adding that China could only do so “within its capacity to help as a friend.”
The Group of 20 major economies will meet in the French city of Cannes on Thursday and Friday, just a week after European Union leaders reached a last-ditch deal to tackle its debt crisis.
Europe is seeking to expand the European Financial Stability Facility (EFSF) to one trillion euros ($1.4 trillion), possibly through a special purpose investment vehicle or the International Monetary Fund.
China, holder of the world’s largest foreign exchange reserves at $3.2 trillion, said it wanted more clarity before investing in the bailout fund after head of the EFSF Klaus Regling, held talks in Beijing to try to win help.
During his visit, Hu will first visit Austria to sign several “framework” agreements, including in the areas of economics and trade, before heading to the G20 meeting, Xinhua said in a separate report.
China’s Vice Foreign Minister Cui Tiankai said Friday that the G20 should focus on the sovereign debt crisis in “developed countries” and the growing pressure of global inflation.
He added that members should make efforts to stabilize financial markets and restore investor confidence.
For its part, G20 partners will also be looking to China to stimulate domestic demand, diversify its export-led economic model and allow the yuan currency to appreciate more freely so as to slim down its massive trade surpluses.
Another Chinese official has played down hopes of a breakthrough at the G20 meeting. Vice Finance Minister Zhu Guangyao, also speaking Friday, said investment in the European bailout fund was not on the agenda.
Beijing fears the financial risk of a major investment, which could also spark a domestic backlash as the Chinese public asks why they should bail out wealthier nations.
Already, opposition to such a move is being expressed on the Internet, on China’s hugely popular weibos ̶ microblogging sites similar to Twitter ̶ and in state media.
“China will only participate in a global program that is defensible to the Chinese people. So don’t expect a ‘bailout’ or ‘rescue’ from China,” China Macro Strategist for brokerage CLSA, Andy Rothman, told AFP.
China has been burned before on overseas investment. It bought stakes in investment bank Morgan Stanley and asset management firm Blackstone only to see values collapse in the 2008 global financial crisis.
“China was taken in. Once bitten, twice shy,” said independent economist Andy Xie, former chief economist for Morgan Stanley.
China will only participate in a global program that is defensible to the Chinese people. So don’t expect a ‘bailout’ or ‘rescue’ from China
China Macro Strategist for brokerage CLSA, Andy Rothman