‘China should invest in EU, not donate aid’
Lagarde is following up her fundraising visit to Russia with a trip to China, where she is expected to woo Beiijing’s backing for a European bailout. Europe is one of the most important markets for Chinese exports, so helping head off an economic disaster there could be seen as an act of enlightened self-interest for the Asian giant.
“The job of the Fund’s head is to beef up the IMF and make it more productive and extensive instead of merely focusing on the rescue package for Europe,” says Professor Liu Baocheng from the University of International Business and Economics in Beijing.
“Therefore I think the initial objective is really how China can work more closely with the IMF,” he adds.
That can be done, according to Baocheng, by strengthening the financial capacity of the structure and in the meantime winning a “justifiable position” for China, “both in terms of membership and also the possibility of the Renminbi [working] as a denominating currency behind the special drawing rights. And then, certain funds will be funneled to help Europe.”
Professor Baocheng believes that China has clearly outlined its position:
“Through this meeting China wants to express a positive attitude and sincerity. China will give a hand, but of course, it will also have its own conditions to reciprocate itself.”
China’s high inflation fell in October, giving Beijing room to stimulate the world’s second-largest economy amid weak US and European growth. But China still has its own issues to spend money on, so it will have to convince its people that it is a good idea to throw the country’s money at a swathe of rich G7 nations.
Baocheng agrees that there has been growing concern in China over how the money is going to be spent.
“I think the government will have to give a right answer to the Chinese people because it is their tax dollars. China should view this as a matter of investment instead that of financial aid,” he believes.
According to the professor, investment should be “targeted more to the valuable assets to help industries instead of writing a blank check to buy the bond which is now rather shaky".
“There has not been a reasonable assurance that a proper return or risk-free package is being offered either by an individual country facing a problem or by the eurozone as a whole,” he notes.