China: European debt crisis is at “crucial moment”

On the eve of an EU-China Summit in Beijing and after Greece passing new austerity measures to save the country from a disorderly bankruptcy, China says the debt crisis in Europe is at a “crucial moment”. “Besides emergency measures, they must also implement systemic, structural and long term reforms,” said the spokesman of Chinese Foreign Ministry, Liu Weimin.

The 14th summit between China and the European Union, scheduled for October, was postponed because of the need for Europeans to replenish their relief fund for countries in difficulty. China has since repeatedly indicated its willingness to participate in the European Financial Stability Fund (EFSF), then its successor the European Stability Mechanism (ESM), which must be implemented in July.

550 billion european sovereign debt

China holds more than $ 550 billion of European sovereign debt, according to expert (information not officially confirmed). Chinese companies have also recently increased the number of takeovers in Europe, in areas ranging from water to energy.

But the second world economy, holding foreign exchange reserves amounted to 3,200 billion, has made no commitment. The EU president, Herman Van Rompuy, and president of the European Commission, Jose Manuel Barroso, will be received by Chinese Premier Wen Jiabao in Beijing on Tuesday.

China has neither the intention nor the ability to “buy Europe“, said Premier Wen Jiabao at an economic forum in Canton early February. And the People’s Daily repeated such affirmed position on Monday just before the summit.

For his part, the president of the Chinese sovereign fund CIC Lou Jiwei (楼继伟) had reservations on whether to buy Italian or Spanish government bonds. “Italy and Spain are hoping that the CIC will increase its purchases of sovereign debt, but policies of employment and budget of these countries are in turmoil, so it should be cautious,” said Lou Jiwei during German Chancellor Angela Merkel’s visit to China in early February.

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