After months of struggling to find a means of fixing its economic situation through internal means, the European Union now has a potential saviour from the outside; namely, China. Speculation about negotiations was sparked when Nicolas Sarkozy called his Chinese counterpart Hu Jintao on October 27th. The Chinese President expressed hope that the measures agreed at the Brussels summit would be effective in stabilizing the Eurozone.
Klaus Regling, head of the European Financial Stability Facility, more commonly known as the bail-out fund for the Eurozone, visited Beijing on Friday, October 28th to meet with officials from the Chinese central bank and finance ministry. According to Regling, he wanted to find out how the fund could structure investments to attract outside investment. He also made it known that the Greek bailout deal was an exceptional case; one that he saw no need to be repeated for other nations. Regling did not expect to reach a conclusive deal with China, but expected the country to continue buying bonds issued by the fund. The visit was merely a “regular consultation” on these investments. Aside from several hundred million worth of triple-A rated bonds issued by the EFSF, China owns an estimated $800 billion worth of euro assets in its $3.2 trillion foreign exchange reserves.
Chinese aid could secure great diplomatic capital for the country and challenge the dominance of the US dollar in world trade, satisfying a domestic agenda. The opportunity to earn international prestige is also a major motivation for Beijing, as it is already a regional power known for helping its neighbouring countries in Asia. The Chinese boost of the EFSF could be about 70 billion Euros – a small portion of Beijing’s has more than 3 trillion US dollars’ worth of foreign reserves.
Chinese Foreign Ministry spokeswoman Jiang Yu expressed great hopes for the success of the bailout deal’s promotion of European integration and sustainable economic development in the Eurozone. But Zhu Guangyao, the Chinese Vice-Minister of Finance, intends to wait for the technicalities to be clear and serious studies to be carried out before any investment decision can be reached. China needs guarantees before it decides – and incentives, World Bank president Robert Zoellick expects.
The EU is China’s chief trading partner and the country has already been exposed to the euro. Many European businesses continue their complaints about unfair trade barriers in China and the country´s trade growth has been reduced due to the economic crisis in the West. Nonetheless, China remains the second-largest economy and hopes to be recognized as a market economy by the EU through financial aid.