CH News – China says willing to help economic growth in Europe

‘So what will you do for us if we buy your bonds instead of US bonds’ said the spider to the fly, as China continues to play us all off against each other.

(And it seems they have gotten ‘assurances’ regarding default risk.)

China says willing to help economic growth in Europe

June 21 (Reuters) — China is willing to help European countries realise stable economic growth, China’s Foreign Ministry said on Tuesday ahead of a visit by Chinese Premier Wen Jiabao to Hungary, Britain and Germany this week.

“The Chinese government has already taken a series of proactive measures to push Sino-Europe trade and economic cooperation, such as buying euro bonds,” ministry spokesman Hong Lei told a regular news briefing when asked about China’s view of the Greek debt crisis.

“China is willing to continue helping European countries realise economic growth in a stable manner through cooperation with relevant countries,” he added, without elaborating.

Wen’s latest visit to Europe from June 24 to 28 will come months after he visited France, Portugal and Spain, and offered to help European economies overcome their debt-driven crises.

The debt crisis afflicting Greece and weighing on the euro is likely to overshadow his visit.

Markets will watch keenly for how Wen handles economic expectations this time, especially with Greece’s woes deepening. Last week, China’s central bank urged European governments to contain debt levels or risk worsening the region’s unfolding debt crisis.

China signalled in April that it could buy more debt from the euro zone’s weaker states. There are no precise figures, but China has said it has bought billions of euros of debt.

Since euro-zone debt worries first rippled through markets last year, China has repeatedly said that it has confidence in the single-currency region and pledged to buy debt issued by some of its troubled member states.

China’s interest in a smooth resolution to the European debt troubles has been clear. Of its $3 trillion or more in foreign exchange reserves, about a quarter are estimated to be invested in euro-denominated assets.

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11 Responses to CH News – China says willing to help economic growth in Europe

  1. Senexx says:

    What sort of ‘assurances’ would be offered? China supporting the EUR would be true of someone buying the debt and holding them hostage wouldn’t it? Unlike those that truly are currency issuing nations with control over the currency

    Reply

    WARREN MOSLER Reply:

    right.

    Reply

  2. Max says:

    Tim, absolutely right. German bonds are the Euro equivalent of U.S. treasury bonds. For the system to be stable the periphery needs to run a trade surplus with Germany – the opposite of the current situation.

    Reply

    roger erickson Reply:

    @Max,

    Hah! Not anytime soon with German industry/labor understandings. The real trade surplus is between German labor and German bankers, and that won’t go away until German labor either wakes up, or German tribal identity weakens.

    Their market will remain irrational longer than we can remain alive.

    Basically, historians will say “Ok, you looked at the Economic Consequences of the Peace, and managed to do something half-way intelligent between 1933-1945. Now, let’s see if you can do the same, at 3x the scale.” So far, our collective response seems way too slow. But 1918-1945 was a long time. The clock is still ticking for the grandchildren of that generation. We’ll eventually see if we can relearn the same lessons faster, slower or at all.

    see http://www.truth-out.org/aftershock-next-economy-and-americas-future-eccles%E2%80%99s-insight/1308588287

    Personally, I love this line: “Eccles thought this was nonsense.”

    Time for Warren to testify to a Congress finally willing to listen? Or run yet again?

    Reply

    Geoff Reply:

    @roger erickson,

    I wouldn’t say that German bonds are the equivalent of US Treasury bonds. Unlike the US, Germany can go bankrupt, just like Greece. But at least you are being paid for the risk in the case of Greece. Not so for Germany!

    Reply

    Tom Hickey Reply:

    @Geoff,

    But the fact of the matter is that the ECB would never consider letting Germany go bankrupt. That’s only for the periphery.

    The EZ’s problem is that Euroland policy is designed to keep capital strong and that means the TBTF the core and to keep the economies of the core humming at the expense of the periphery, which only along for the ride. Just like the Fed is run for capital in the US, i.e., in particular TBTF’s that staff the highest political appointed offices with their cronies.

    This is regarded as economic efficiency and effectiveness, since the supply of labor is abondant and the supply of capital limited. It’s all perfectly rational in the neoliberal construct. So Lloyd Blankfein can honestly say that he (GS) is doing “God’s work” from this point of view.

    Geoff Reply:

    @Tom,

    “Periphery” sounds so derogatory when you say it like that, lol. Your view is certainly very cynical, but not necessarily wrong.

  3. Walter says:

    Yes, it seems that China holds the key to eur/usd nowadays.

    Wellink recently proposed that the Eurozone should double its EFSF size to €1.5trln. Last time when they issued some bonds from this vehicle Japan and I believe China too were standing in line to buy.

    The EFSF (and soon ESM) is regularly referred to as kind of Euro Treasury in the making. Personally I consider the vehicle still at the level of currency user and we have seen with Ireland to what that can lead. I mean it is incorporated under Luxembourg law, requires some paid up capital from the member states and the rest is guaranteed by the member states that are all currency users. The fund is also limited in size, which is of course never the case for a currency issuer, when it comes to spending capacity.

    How do you see this Warren?

    Should this EFSF and its issued bonds still be seen as currency user’s level and thus no solution or should we see guarantees from all euro member states together as issuer’s level and this EFSF indeed as kind of little Euro Trasury?

    Reply

    Tim Reply:

    @Walter,

    I wouldn’t consider all eurozone members states as currency users.

    Germany is certainly not a currency user, although it appears this way on paper. But if Germany was ever confronted with a crisis like Greece or Ireland, it would become apparent, by the actions of the ECB or by changes in the treaties, that Germany is not a currency user, and never was.

    Perhaps the same is true for France.

    Reply

    Walter Reply:

    @Tim,

    Mmmmmm, ….”all euro members are equal, but some are more equal than others”.

    Reminds me of a famous farm……there they also had PIGS.

    Reply

    WARREN MOSLER Reply:

    Maybe

    Be an exciting day for sure when it comes to that

    Reply

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