Europe looks to China as its saviour
Could China be Europe's white knight?world Updated: Jan 11, 2011 23:36 IST
Could China be Europe's white knight?
Europe's roiling debt crisis is deepening once again, with analysts fearing that cash-strapped Portugal and perhaps far-larger Spain might soon follow Greece and Ireland in needing a massive international rescue.
But speculation among traders that cash-rich China might step in and buy hard-hit European bonds, along with Chinese officials suggesting that Beijing would keep supporting the euro, helped the currency claw out a gain on Monday after briefly hitting a four-month low against the dollar. The market's reaction underscores the global clout of Chinese cash, with the mere suggestion that Europe might enlist Beijing's aid having a calming effect on some investors.
China is already embarking on a charm offensive in Europe, seeking to strengthen its diplomatic and economic footprint in the region.
Influential Vice Premier Li Keqiang landed in London on Monday, inking auto, energy and other trade deals worth more than $4 billion with British officials.
"Together, today's deals will safeguard 700 jobs in the United Kingdom and are estimated to have the potential to create many more," Nick Clegg, Britain's deputy prime minister, said in an address welcoming Li. "The agreements we have seen today . . . [demonstrate] the momentum we are building together towards even stronger relations."
Those agreements came on the heels of equally lucrative stops last week in Berlin - Chinese demand has been driving Germany's export-led recovery - and Madrid.
"This has been a freezing winter for Europe, not only in terms of the heaviest snow for decades . . . but also as a result of the debt problem that has beset some countries," Liu Xiaoming, Chinese ambassador to Britain, wrote in the Telegraph newspaper last week. Nevertheless, he added, "cold Europe is feeling the warmth of the Chinese breeze. China is doing what a Chinese proverb says about 'sending charcoal in snowy weather."
China has a strategic interest in shoring up the euro, which has fallen sharply against the dollar in recent weeks, as debt fears have rippled through the 17-nation euro zone. China's own currency is pegged to the dollar, so the fall in the euro against the US greenback has made Chinese exports more costly in the European Union, which trades more with Beijing than even the US. European officials have also been seeking China out.
Although Li did not publicly confirm the report, published during his visit to Madrid, he said China would continue to "play an active role" in finance markets, and that China would continue to support the euro.
(In Exclusive Partnership with The Washington Post)