CHINA REMAINS confident in Europe and is willing to keep investing in the euro zone, foreign minister Yang Jiechi told a news conference yesterday during the annual meeting of China’s parliament, the National People’s Congress.
“The euro zone has encountered quite a lot of difficulties, but we believe Europe and the euro zone have the capability and wisdom to overcome the temporary difficulties, tackle the debt problems and achieve new development,” Mr Yang told a news conference during the legislative gathering.
Mr Yang’s upbeat comments reflect the positive view of ties with Europe since the visit to Ireland last month by vice-president Xi Jinping, heir-apparent to president Hu Jintao. The trip also included visits to Turkey and the United States.
“We have been supporting the stability of the euro and European finance in our own ways. We are willing to continue to invest in Europe for mutual benefits and win-win results,” he said.
The EU is China’s largest export market and it wants to ensure stability to help keep growth on track.
To do this, China has a war chest of nearly € 2.5 trillion in foreign exchange reserves. It is the only country left with the necessary economic muscle to rescue some European governments.
“Significant achievements have been made from the recent meeting between Chinese and European leaders. The China-Europe relationship has a very broad prospect,” he said.
China’s euro bond holdings are mainly focused on Germany and France, and much smaller than its holdings of US debt. China is believed to have bought Irish sovereign debt, but the amount is unknown. About a quarter of China’s foreign exchange reserves are held in euro, while 70 per cent are in dollars.
China, now the world’s second biggest economy, has been broadly supportive of Europe in its hour of need, although it has repeatedly sought more clarity on what Europe is doing to shore up its financial structure before it makes any concrete commitments.
Mr Yang’s comments are in line with remarks made by premier Wen Jiabao at the EU-China summit last month, when China said it was ready to get “more deeply” involved in resolving Europe’s debt crisis.
Not everyone in China is happy about the government stepping in to help Europe. Ordinary people wonder why China, still a developing country in many ways, should be helping to bail out a rich grouping of countries like Europe.
China is also likely to play hardball in demanding concessions, such as asking the EU to give China full market economy status.
Any bigger role for China in solving the debt crisis would mostly likely be via the International Monetary Fund and the European Financial Stability Fund.