The One
4th November 2011, 13:02
Here we go what Does China Want From Euro Bailout Deal.
http://news.sky.com/sky-news/content/StaticFile/jpg/2011/Nov/Week1/16103034.jpg
French president Nicolas Sarkozy gave his Chinese counterpart Hu Jintao a warm welcome
As Europe looks to China for a bailout to help relieve its financial woes, the focus is turning to what it is that the Chinese want in return.
Europe hopes China will make a sizeable contribution to its expanded one trillion euro rescue package.
The Chinese - who have $3 trillion in foreign currency reserves, earned through exporting much more to the rest of the world than they import - certainly have the cash to do it.
Indeed, China has already been of considerable help. The country owns an estimated 600bn euros in euro-denominated debt, and has already invested in Europe's original bailout fund.
It also makes sense for the Chinese to pitch in. They will want to protect their existing investment and they also need to keep their best customers buying.
China wants to help Europe, it's of mutual benefit. But there's too much uncertainty.
Zhang Bin, Chinese economist
China's economy is export driven, and Europe is its biggest market.
But so far the Chinese are being cagey about exactly how much they will be willing to stump up for the enlarged fund.
Through its state-controlled media, the Chinese Government has said it "can't be Europe's saviour".
At the G20 Summit in Cannes, China's vice minister of finance, Zhu Guangyao, said it was "too soon" for China to make a commitment.
Beijing's reluctance is understandable. China wants to know Europe has a workable plan for fixing its finances.
Political upheaval in Greece and lack of action in Spain and Italy do not inspire the Chinese with confidence.
"China wants to help Europe, it's of mutual benefit," said Chinese economist Zhang Bin.
"But there's too much uncertainty. There's no agreement in Europe about how to solve their problems. So China doesn't want to act at the moment."
But the Chinese are also excellent negotiators. If they do help out, they'll want something in return. The question is: what, exactly?
The immediate answer is easy. At the close of G20 they'll want a communiqué that does not single out China for manipulating its currency.
Critics in Europe and the US complain that Beijing is keeping the value of its currency - the Renminbi - at an artificially low level, giving Chinese companies an unfair advantage.
China's leaders say they are sick of being blamed for the West's self-inflicted economic problems.
But there is also speculation that China may have a political goal in mind such as a dialling back of criticism over its human rights abuses, for instance.
They may want a promise that Western government leaders will stop meeting with exiled Tibetan spiritual leader the Dalai Lama, or even an end to the arms embargo that Europe slapped on China after the 1989 Tiananmen massacre.
In Beijing, however, few people believe such a deal is likely.
"I don't think it would work very well," said Zhu Feng, professor of international politics at Peking University.
"It would cause a backlash against China."
Instead, Professor Zhu thinks China may have an economic goal in mind.
The country's leaders have signalled previously that they would like to be given "full market economy status" by the EU. This would give Chinese companies greater access to European markets.
But he warns that China may be limited by its own economic problems; inflation, a possible housing bubble, and slowing growth.
"It's a pragmatic attitude," he said.
"We aren't in a good position to put money into Europe, because we have challenges of our own
http://news.sky.com/home/business/article/16103020
http://news.sky.com/sky-news/content/StaticFile/jpg/2011/Nov/Week1/16103034.jpg
French president Nicolas Sarkozy gave his Chinese counterpart Hu Jintao a warm welcome
As Europe looks to China for a bailout to help relieve its financial woes, the focus is turning to what it is that the Chinese want in return.
Europe hopes China will make a sizeable contribution to its expanded one trillion euro rescue package.
The Chinese - who have $3 trillion in foreign currency reserves, earned through exporting much more to the rest of the world than they import - certainly have the cash to do it.
Indeed, China has already been of considerable help. The country owns an estimated 600bn euros in euro-denominated debt, and has already invested in Europe's original bailout fund.
It also makes sense for the Chinese to pitch in. They will want to protect their existing investment and they also need to keep their best customers buying.
China wants to help Europe, it's of mutual benefit. But there's too much uncertainty.
Zhang Bin, Chinese economist
China's economy is export driven, and Europe is its biggest market.
But so far the Chinese are being cagey about exactly how much they will be willing to stump up for the enlarged fund.
Through its state-controlled media, the Chinese Government has said it "can't be Europe's saviour".
At the G20 Summit in Cannes, China's vice minister of finance, Zhu Guangyao, said it was "too soon" for China to make a commitment.
Beijing's reluctance is understandable. China wants to know Europe has a workable plan for fixing its finances.
Political upheaval in Greece and lack of action in Spain and Italy do not inspire the Chinese with confidence.
"China wants to help Europe, it's of mutual benefit," said Chinese economist Zhang Bin.
"But there's too much uncertainty. There's no agreement in Europe about how to solve their problems. So China doesn't want to act at the moment."
But the Chinese are also excellent negotiators. If they do help out, they'll want something in return. The question is: what, exactly?
The immediate answer is easy. At the close of G20 they'll want a communiqué that does not single out China for manipulating its currency.
Critics in Europe and the US complain that Beijing is keeping the value of its currency - the Renminbi - at an artificially low level, giving Chinese companies an unfair advantage.
China's leaders say they are sick of being blamed for the West's self-inflicted economic problems.
But there is also speculation that China may have a political goal in mind such as a dialling back of criticism over its human rights abuses, for instance.
They may want a promise that Western government leaders will stop meeting with exiled Tibetan spiritual leader the Dalai Lama, or even an end to the arms embargo that Europe slapped on China after the 1989 Tiananmen massacre.
In Beijing, however, few people believe such a deal is likely.
"I don't think it would work very well," said Zhu Feng, professor of international politics at Peking University.
"It would cause a backlash against China."
Instead, Professor Zhu thinks China may have an economic goal in mind.
The country's leaders have signalled previously that they would like to be given "full market economy status" by the EU. This would give Chinese companies greater access to European markets.
But he warns that China may be limited by its own economic problems; inflation, a possible housing bubble, and slowing growth.
"It's a pragmatic attitude," he said.
"We aren't in a good position to put money into Europe, because we have challenges of our own
http://news.sky.com/home/business/article/16103020