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IMF chief heads to China amid eurozone crisis

International Monetary Fund chief Christine Lagarde was due in China on Wednesday for talks likely to focus on the deepening eurozone debt crisis and Beijing's possible contribution to a bailout fund.

world Updated: Nov 09, 2011 07:50 IST

International Monetary Fund chief Christine Lagarde was due in China on Wednesday for talks likely to focus on the deepening eurozone debt crisis and Beijing's possible contribution to a bailout fund.

Fresh from a visit to Russia where she warned Moscow against complacency given the budget crises in eurozone states, Lagarde is due to give a speech at an international financial forum as part of her two-day visit to Beijing.

It is still unclear who she will be meeting with, but talks are likely to focus on China's possible contribution to a bailout fund -- the European Financial Stability Facility -- to help the eurozone overcome the debt crisis.

European leaders have called on China, which has the world's largest foreign exchange reserves at $3.2 trillion, to invest in the fund.

The head of the fund, Klaus Regling, has travelled to Beijing for talks about a possible contribution, but China has so far made no firm commitment to provide financial assistance for the troubled eurozone.

Europe has been discussing with China and other investors how to structure a special purpose investment vehicle and is exploring the possibility of linking it to the IMF.

A move to help developed European countries would be a hard sell for Communist Party leaders in a country where millions of people live in poverty and inflation and soaring housing costs are straining household budgets.

China has also been burned before on risky overseas investment. It bought stakes in investment bank Morgan Stanley and asset management firm Blackstone only to see values collapse in the 2008 global financial crisis.

The losses led to severe criticism of the investment choices made by the $400 billion sovereign wealth fund -- China Investment Corp (CIC) -- only a year after it was established in 2007.

At the weekend, a top official at CIC accused Europe of "indolence."

Jin Liqun, chairman of the board of supervisors of the fund, said in an interview with Al-Jazeera that Beijing would consider investing in Europe but any decision would be based on likely investment returns.

Lagarde, whose speech begins at 0220 GMT, is also due to brief the press about her visit on Thursday.