EU takes begging bowl to Beijing
28 Oct, 2011 08:54
The chief of the European Union bailout fund is holding talks with Chinese officials on China’s possible involvement in saving the euro. Klaus Regling also hinted that his fund could become part of a joint vehicle with the IMF.
China has always said it intended not to invest too heavily in helping out the European economy. However, EU bailout chief Klaus Regling says the Asian giant might change its mind if given the option of dealing with an IMF-backed vehicle. Regling travelled to Beijing for talks with China's Central Bank and Finance Ministry on Friday, a day after European leaders reached an agreement on tackling Europe’s debt crisis. The trip follows speculation that China might agree to help Europe out of its financial turmoil, with French President Nicolas Sarkozy talking up the idea of China helping rescue the struggling European currency."If the Chinese, who have 60% of global [currency] reserves, decide to invest in the euro instead of the dollar, why refuse?" said the French president.China, for its part, favors funding attractive, solid, safe investment opportunities. And as Dr Baozhi Qu, a senior research fellow at the Skolkovo Institute for Emerging Market Studies in Beijing told RT, Europe has no other choice other than to ask China for help. “They have no choice – they want to increase the size of the fund from 440 billion euros to one trillion, so they need to seek outside help,” he explained.And China may potentially be interested in helping the EU because Europe is a major market for Chinese goods, so it stands to benefit from a stable European economy. A senior adviser to the Chinese government has been quoted as saying that the last thing China wants is to "throw away the country's wealth and be seen as just a source of dumb money." And according to Dr Qu, there is some truth in this. “China will take a lot of precautionary measures to make sure the money is returned. After all, the financial market evaluates the European Financial Stability Facility as a triple-A borrower, so I think the risk is under control for now,” he said.Pierre Guerlain, a professor of political science at Paris West University Nanterre La Defense, agrees that China is interested in saving Europe, but at a price.“They are not going to throw good money after bad to save Europe just because they love Europe,” he said. “If the Chinese helped, it would be for their advantage.”Guerlain believes that China’s financial aid to the EU would mean a serious shift in the global economy.“Actually, symbolically, it means: if you ask the Chinese to save Europe, you ask the Chinese to become the new financial hegemonic power,” he said. “And this is something very serious. ““It’s ludicrous on some level, hard to understand,” he added. “It is as if both the US and Europe were organizing the transition to Chinese hegemonic power.”