China's premier, Wen Jiabao, pledges support for euro
The country vows it will not reduce its holdings of European government bonds, and will double trade with Greece
- The Guardian, Monday 4 October 2010
- Article history
Chinese prime minister Wen Jiabao, addresses the Greek parliament in Athens yesterday. Photograph: Petros Giannakouris/AP
China pledged to support a stable euro and not reduce its holdings of European government bonds, in an effort to deflect criticism of its foreign exchange policy ahead of this week's EU-China summit.
Chinese premier Wen Jiabao, who is at loggerheads with the United States over the yuan and likely to face similar complaints during his tour of European countries emphasised China's willingness to cooperate with the EU.
"I have made clear that China supports a stable euro," he said during a visit to Greece at the start of a one-week European tour. "We will not reduce the holdings of European bonds in our foreign exchange portfolio."
Wen, who offered on Saturday to buy an unspecified amount of Greek government bonds when debt-laden Athens resumes issuing, said he was glad Greece was starting to emerge from the shadows of its debt crisis. Wen vowed to double trade with Greece to $8bn (£5bn) within five years and provide a $5bn credit line to Greek shipowners buying Chinese-built vessels.
China has said it needs to diversify its foreign currency holdings and has bought Spanish government bonds. Chinese state entities have been conservative about investing in foreign financial markets and the Chinese government faces domestic criticism over losses incurred from the global financial crisis.
At the height of the European debt crisis this year, Chinese officials, concerned that the crisis could hurt the global economy, pressed European officials to restore confidence in the euro. But Beijing has rejected discussion of its foreign exchange policy. It even blocked an attempt by G20 leaders in June to praise its decision to allow greater flexibility in the yuan's exchange rate.
Ahead of a China-EU summit on 6 October, Wen urged the bloc to recognise China as a market economy, making it less vulnerable to anti-dumping charges under WTO rules. In exchange, China offered to boost copyright protection and widen bilateral trade.
"China commits to improving the investment environment, to intensify copyright protection, widen bilateral trade and upgrade technology cooperation," he said in his speech in Greece's parliament through an interpreter.
But despite its growth, China remains an emerging economy, Wen said. "The basic reality of China, such as a huge population, a weak economic base, and unbalanced growth has not radically changed," Wen told parliament.
"Per capita GDP is just one eighth of Greece's and the percentage of population below the poverty line is three times that of Greece. China continues to be an emerging country."
Wen and his Greek counterpart George Papandreou said in a joint statement the world's nations need to coordinate economic policies for global recovery to find a sure footing. "Global economic recovery is a journey with many turns and a full exit from it requires joint efforts," Wen said yesterday. He made no comments on the yuan. On Saturday he said he was willing to work with the EU to confront the financial crisis and reform the international financial system.
He said he was confident Greece was on track to exit a debt crisis that shook the euro and said China wanted to boost cooperation with Greece, which faces its worst recession in decades.
"Greece is China's best friend in the EU," Wen said at a meeting with Greek opposition leader Antonis Samaras. Bilateral trade volume should double to $8 billion euros a year in 2015 with Greek traditional exports, such as olive oil, increasing.
"A few months ago, [we] signed an agreement to purchase 290 tonnes of Greek olive oil," Wen said. "Last night, for the first time in my life, I dipped a bite of bread in olive oil. It tasted very good."
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| China offers to buy Greek debt |
Prime minister Wen Jiabao says his country will support Greece and rest of euro zone to overcome financial crisis. Gerald Tan reports on the significance of China's proposal to buyout Greece's debt |
Wen Jiabao, the Chinese prime minister, made the offer on Saturday at the start of a two-day visit to Greece, his first stop in a European tour. During talks with George Papandreou, the Greek prime minister, Wen said China would double its trade ties with Greece over the next five years, underscoring Beijing's use of economic strength to win friends. "China will undertake a great effort to support euro zone countries and Greece to overcome the crisis," Wen said. In addition to seeing economic opportunities in Greece, China's support of a struggling European country may also help deflect international criticism of its trade policies and its refusal to let its yuan currency appreciate sharply. 'Full market status' Wen said during the visit that China will address European concerns over its investment rules and copyright violations, but wants the EU to relax remaining trade barriers with Beijing in return. Speaking at Greece's parliament, he urged the EU to recognise China's "full market economy status" and relax restrictions on high-tech exports. "I have repeatedly said that China supports a strong euro and will not reduce the number of European bond holdings from its foreign exchange reserves," he said. Wen sought to ease European concern that overseas companies operating in China face licensing rule restraints that give local competitors an unfair advantage. He said China would "strengthen dialogue" with the EU and was committed to continue "improving investment, confronting issues of intellectual copyright protection, expanding bilateral commerce and upgrading cooperation in technology." Wen did not specify how much Greek debt China would be willing to buy or which Chinese entities would buy the bonds. Chinese state entities have been generally conservative about investing in foreign financial markets and the Chinese government faces domestic political criticism over losses incurred by these entities during the global financial crisis. China has a lot to gain from getting a foothold into Europe, Vagelis Agapitos, an economist in Athens specialising in investment, said. "They [China] get a bargain in terms of buying into strategic industries, such as the port authorities, the railways and the logistic centre, which is important for the export of Chinese goods," Agapitos told Al Jazeera. High borrowing cost A senior Greek government official said Wen made clear his offer concerned buying bonds only when the country returned to markets. Greece, which is currently funded through a 110 billion euro ($150 billion) EU/IMF bailout, is only issuing short-term treasury bills for the time being. Since the true scale of its debt burden emerged late last year, investors have shunned its bonds. The yield they demand to hold 10-year Greek debt has shot up to 10 per cent, compared with just 2.3 per cent for similar bonds from the euro zone's biggest economy Germany, making it too expensive for Greece to seek long-term funding in international markets. It has said it wants to return to markets some time next year to sell longer-term debt. "There is domestic pressure [in Greece] not to sell itself cheaply, but there is also quite significant international pressure regarding the total debt, which is at 120 per cent of the GDP, and rising," Agapitos said. "This needs to go down in order to avoid debt restructuring which would be disastrous, not only for Greece but also for the European Union as a whole," he said. China, at loggerheads with the US over the yuan and likely to face similar complaints during this European tour, emphasised its willingness to co-operate with the 27-nation EU on financial issues. "China is prepared, hand in hand with the EU, as passengers in the same boat, to strengthen co-operation ... to confront the financial crisis," Wen said. "I believe that we can undertake a genuine effort to promote the reform of the international financial system and strengthen its supervision," he said. |
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