China Promises More Help For Euro Debt

By: EW News Desk Team   Date: 16 February 2012

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EconomyWatch, News Desk Team

 

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16 February 2012

China is ready to invest even further into eurozone governments’ debt, reported Reuters on Wednesday, after the central bank’s governor called on the region to produce more attractive investment options.

China wants to “get more involved” in Europe, said People’s Bank of China Governor Zhou Xiaochun in Beijing, echoing comments made by Chinese Premier Wen Jiabao earlier that week.

“China will always adhere to the principle of holding assets of EU sovereign debt. We would participate in resolving the euro debt crisis,” said Zhou, as quoted by Bloomberg, who admitted that his nation, along with other emerging countries, were just waiting for the “right time” to help the eurozone.

But "we also hope that the euro zone and EU can innovate their mechanisms to offer new products that are more helpful for Sino-Europe cooperation," Zhou added.

During the China-EU summit earlier this week, Chinese Premier Wen Jiabao had stressed the need for China to play a bigger role in the eurozone, noting that his country had yet to cut its reserves’ exposure to the region.

"At the G20, our state leaders promised European leaders that, amid the global financial crisis and the Europe sovereign debt crisis, China will not cut the proportion of euro exposure" in its reserves, said Zhou in a speech at the University of International Business and Economics in Beijing.

"Some people had cast doubt or suspicion over the currency, but for the People's Bank of China, we have always been confident in the euro and its future.”

Nearly a quarter of China’s $3.2 trillion worth of foreign reserves are now being held in euro-denominated assets. European Union president Herman Van Rompuy has since welcomed additional Chinese funds into the region, while warning the rest of the world not to underestimate the political will within the region to keep the euro zone intact.

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“We highly value China's confidence," said Van Rompuy, who was also at the summit in the Chinese capital on Tuesday.

“Wen and Zhou are giving the best support China can offer now, which is to send out positive messages such as promising not to cut euro assets and to buy European bonds to help bolster market confidence,” added Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd. who previously worked at the European Central Bank.

“How much and when China will buy will depend on its foreign-exchange investment strategy – when they find the pricing and exchange rate favourable.”


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