Eurozone looks up to ‘Made in China’ bailout

0
352
Spread the love

euro sovereign debt default crisis

As leaders of the worlds 20 biggest economies brace up for the G-20 summit from Thursday in Cannes focused on the Euro crisis, all speculations will be put to rest about Chinas role in pulling out Europe from fiscal abyss. Chinese President Hu Jintao will have all eyes set on him, with bolstered by a buoyant economy that is growing at about 9% a year and holding a war-chest of $3.2 trillion in foreign exchange reserves.

INVESTMENT OPTIONS

A closer analysis of the situation unravels that China will not be able to stem the Euro bleeding and will have to focus on keeping their own economy from stalling. Europe is the biggest importer of the Made in China consumer goods. China does not buy as much, as it sells to the European market and would not like to place a bold bet of investments on the unstable Euro economy.

China can neither take up the role as a savior to the Europeans, nor provide a cure for the European malaise, the state-run Xinhua news agency said at the weekend.

China has made many promises to many people Greece, Portugal and Italy through the years, though it has been slow to deliver wary of losing if it invests rashly in the middle of the crisis.

GREEK TRAGEDY

Melt down in Greece one of the most troubled eurozone members has sent the crisis into another tail spin. A new downturn in Europe would hit China hard. At the giant China import-export fair in Guangzhou this week it was reported that orders from Europe are falling and that’s hurting China’s exporters. Vice Finance Minister Zhu Guangyao, 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 Chinas hugely popular weibos micro blogging sites similar to twitter and in state media.

China will only participate in a global programme that is defensible to the Chinese people. So dont expect a bailout or rescue from China, Andy Rothman fromChina Macro Strategist for brokerage CLSA told AFP.

G-20 partners will 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.

For his part, President Hu Jintao will make it clear that hes not about to “save” Europe – in fact he’s probably as concerned as anyone else about the way Greece seems to be sinking deeper into the economic and political mire and the Euro zone may be heading for even more trouble.

Sources: The Daily Star, CNN and BBC

Facebook Comments