Wandering China

An East/West pulse of China's fourth rise from down under.

‘Too Soon’ to Discuss China Buying More EFSF: Zhu [Bloomberg]


Soft power card to be played: In the midst of the Eurozone uncertainty, China appears to ponder its next move ahead of G20 talks.

A day ahead of the meetings, Hu Jintao meets up with IMF representatives to discuss global efforts to tackle economic woes (Xinhua, November 2, 2011).

Just a week ago in China Daily, this report (Emerging economies ‘to help bail out EU’ China Daily, October 27, 2011) revealed China’s intent to step in through the IMF (note President Hu’s meeting above) to advance voting leverage ahead of the G20 summit. On the surface, it also seems in China’s interests to help solve Europe’s sovereign-debt crisis to both avert disruptions to the global economy, and keep one of its biggest export markets in good shape.

This Bloomberg report however reveals Vice Finance Minister Zhu Guangyao‘s comments that it is too soon to discuss China adding to its existing portfolio by buying more bond purchases to bolster the European Financial Stability Facility (EFSF). Sleight of hand Tao Guang Yang Hui (韬光养晦) or honest answer?

To provide perspective, an earlier announcement by state run Xinhua over the weekend –“China can neither take up the role as saviour to the Europeans, nor provide a ‘cure’ for the European malaise.”

Seen by some as an external saviour for Europe’s current woes, this BBC report too, begs to differ (Why China won’t save the world BBC, November 3, 2011). On the surface, President Hu seems to be ‘in an enviable position, with China’s economy growing at about 9% a year and holding a war-chest of $3.2 trillion (£2tn, 2.3tn Euros) in foreign exchange reserves.’ That said, it argues ‘China has huge holdings of euros and Europe is important to China, so it will invest, but on a clear-headed, commercial basis. Just don’t expect China to save the world.’

This chess move to increase financial soft power leverage especially when there is so much international media attention, is too good an opportunity to pass up. China’s just not revealing its cards yet.

Also, see G‐20 Communique PDF here

– – –

‘Too Soon’ to Discuss China Buying More EFSF: Zhu
by Wu Zijing
Source – Bloomberg, published November 3, 2011

It’s “too soon” for China to discuss further bond purchases from Europe’s revamped rescue fund, Vice Finance Minister Zhu Guangyao told reporters in Cannes, France, on the eve of a summit of world leaders.

While there are proposals to bolster the European Financial Stability Facility, “there are no concrete plans yet so it’s too early to talk about further investments in these tools,” Zhu said today. Zhu said the rescue fund, already part of China’s portfolio, is an “important tool” to address the sovereign debt crisis.

European Union leaders agreed to boost the 440 billion-euro ($605 billion) fund’s firepower to 1 trillion euros last week, as part of a broader crisis-fighting package that aimed to shore up banks and provide new aid to Greece.

When the plan was announced on Oct. 27, French President Nicolas Sarkozy said he planned to call Chinese counterpart Hu Jintao to discuss China contributing to Europe’s efforts to resolve the debt crisis. EFSF Chief Executive Officer Klaus Regling visited Beijing last week for talks with Chinese authorities.

The EU backed two ways of leveraging up the fund, by insuring bond sales and by creating an investment vehicle that would court outside money from public and private financial institutions and investors. Implementation details on both options may emerge this month.

Zhang Tao, director general of international department of the People’s Bank of China, said that further details need to be worked out for each of the options. “At present there’s no specific plan that people have clear understanding of,” he said.

Sale Delayed
Europe’s bailout fund is delaying a 3 billion-euro ($4.1 billion) bond sale after Greek Prime Minister George Papandreou’s request for a referendum on the rescue pact for his country roiled markets. The EFSF is putting off the 10-year issue “due to market conditions,” according to Luxembourg- based spokesman Christof Roche.

The fund may wait for the outcome of the Nov. 3-4 Group of 20 summit in Cannes before selling the bonds, according to a person with knowledge of the matter.

The EFSF, which was established in June 2010, has raised 13 billion euros from three bond issues this year, according to data compiled by Bloomberg. Its 5 billion euros of 3.375 percent notes sold in June and maturing July 2021 fell 0.5 cent to 99.85 cents, after rising for each of the past three days, according to Bloomberg Bond Trader prices.

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Filed under: Beijing Consensus, Bloomberg, Charm Offensive, Chinese Model, Communications, Domestic Growth, Economics, European Union, Finance, Foreign aid, Government & Policy, Influence, International Relations, Mapping Feelings, Market Watch, Media, Peaceful Development, Politics, Public Diplomacy, Social, Soft Power, Strategy, Tao Guang Yang Hui (韬光养晦), The construction of Chinese and Non-Chinese identities, Trade

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