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Beijing, Tendering Support to Europe, Helps Itself
By LIZ ALDERMAN
PARIS
WHAT’S with China’s charm offensive in Europe?
Chinese officials have stepped up their vows of support for European economies in the last several weeks, pledging to help Europe contain a sovereign debt crisis and accelerate a recovery.
This week, Beijing renewed a promise to buy debt from Spain and other countries feared to be facing a bailout.
China’s increasingly vocal backing appears aimed at curbing losses on its growing financial investments in Europe, as well as helping to thwart a deeper downturn in an economic bloc that has overtaken the United States as China’s largest trading partner.
Although surging growth has helped transform China into an economic powerhouse, a worsening of Europe’s crisis would be bad for business because the European Union buys a quarter of all goods made in China.
“If you’re an export-driven economy like China, and the E.U. and the euro zone are your key export markets, it’s in your interest to stabilize the financial and economic situation,” said Ken Wattret, chief euro zone economist at BNP Paribas in London.
This week, a delegation led by China’s executive deputy prime minister, Li Keqiang, is reinforcing that message in a series of visits to European capitals.
Prime Minister José Luis Rodríguez Zapatero of Spain, Chancellor Angela Merkel of Germany and Prime Minister David Cameron of Britain are rolling out the red carpet at each stop.
Mr. Li, who is expected to become China’s next prime minister, is pledging to buy bonds worth billions of euros and to commit billions more in business deals.
In newspaper opinion pieces published in all three countries this week, Chinese officials emphasized Beijing’s support for European leaders as they seek to exit the crisis.
Having failed so far to dig Europe out of a hole or quell fears that the crisis will spread, European officials are welcoming Mr. Li’s spending spree.
This week, the Pacific Investment Management Company, the largest bond fund in the world, said it had stopped buying the government bonds of Portugal, Greece and Ireland, where bond yields have risen, reflecting concerns of a possible default.
In an interview with the German newspaper Süddeutsche Zeitung, Andrew Bosomworth, Pimco’s manager in Munich, said the fund was also not investing new money in countries that were solvent but considered risky, including Spain and Italy.
China, on the other hand, is looking to diversify some of its $2.7 trillion in foreign currency reserves away from United States Treasury debt and its low yields, and into other investments, including euro-denominated debt.
And China could profit handsomely if its pledges of support helped countries like Greece and Portugal avoid a restructuring.
On Wednesday, the Spanish news media reported that Mr. Li said China would buy 6 billion euro ($7.8 billion) worth of bonds from Spain.
Support for Europe could have another beneficial effect for Beijing. Although China is not saying how much debt it is buying, analysts said the mere pledge to buy debt made it difficult for investors to bet against the euro, helping to bolster the currency.
A sharply weaker euro, which has already slid nearly 10 percent against the dollar in the last year, would make high-quality goods produced in countries like Germany more affordable on world markets, providing a greater challenge to Chinese exports.
Continued purchases of troubled European debt could carry risks further out for China, especially since Europe has decided to force some sovereign debtholders to take losses for defaults on investments made after 2013.
If part of the Chinese strategy is to “ensure that they get repaid when others don’t, they’re kidding themselves,” said Kenneth S. Rogoff, an economics professor at Harvard and a former chief economist at the International Monetary Fund.
A further benefit redounds for China in its European strategy, analysts say. This week, Mr. Li presided over more than a dozen business deals with Spanish companies, including one between China Petrochemical and Repsol, Spain’s largest oil company, to expand oil exploration in Latin America.
Both Spain and Portugal have significant strategic holdings in Latin America and Africa, two parts of the world where China wants to continue expanding.
“Spain and Portugal are not as much a beachhead for China into Europe — how strategically important are they, really?” said Marko Papic, a senior Europe analyst at Stratfor, a geopolitical intelligence company in Austin, Tex. “But they do have these cultural, colonial and historic links to two regions that China is interested in.”
Mr. Li arrived in Berlin on Thursday for talks with the economy minister, Rainer Brüderle. On Friday, he is scheduled to meet with Mrs. Merkel; the German president, Christian Wulff; and the foreign minister, Guido Westerwelle.
German exports to China amounted to 36.5 billion euros in 2009, and imports totaled 55.5 billion euros. Germany is China’s biggest trading partner by far in Europe, and trade is surging, especially for high-value electrical and electronic goods. Germany’s car industry, which suffered during the downturn, has recovered thanks to an increase in Chinese demand.
But German companies want Mrs. Merkel to lobby for the ability to invest more in China. So far, Beijing has been noncommittal to such requests.
Instead, China intends to use this visit to ask Germany to open its doors further for Chinese investment.
Mr. Li’s visit is also seen as crucial in Britain, two months after Mr. Cameron helped win significant industrial orders during a trip to Beijing with ministers and business executives.
Mr. Cameron has pledged to strengthen economic ties with faster-growing economies, and hopes to build on his success in Beijing as a counter to a strict austerity program that is stifling the British economy.
China has made it clear, though, that its dealings with Britain are a part of its broader relations with the European Union.
“China alone may not be able to solve the problem for Europe,” Liu Xiaoming, China’s ambassador to Britain, wrote in The Telegraph on Tuesday, “but it is willing to help as a true friend and partner when Europe is in need.”
http://www.nytimes.com/2011/01/07/bu...Support&st=cse
By LIZ ALDERMAN
PARIS
WHAT’S with China’s charm offensive in Europe?
Chinese officials have stepped up their vows of support for European economies in the last several weeks, pledging to help Europe contain a sovereign debt crisis and accelerate a recovery.
This week, Beijing renewed a promise to buy debt from Spain and other countries feared to be facing a bailout.
China’s increasingly vocal backing appears aimed at curbing losses on its growing financial investments in Europe, as well as helping to thwart a deeper downturn in an economic bloc that has overtaken the United States as China’s largest trading partner.
Although surging growth has helped transform China into an economic powerhouse, a worsening of Europe’s crisis would be bad for business because the European Union buys a quarter of all goods made in China.
“If you’re an export-driven economy like China, and the E.U. and the euro zone are your key export markets, it’s in your interest to stabilize the financial and economic situation,” said Ken Wattret, chief euro zone economist at BNP Paribas in London.
This week, a delegation led by China’s executive deputy prime minister, Li Keqiang, is reinforcing that message in a series of visits to European capitals.
Prime Minister José Luis Rodríguez Zapatero of Spain, Chancellor Angela Merkel of Germany and Prime Minister David Cameron of Britain are rolling out the red carpet at each stop.
Mr. Li, who is expected to become China’s next prime minister, is pledging to buy bonds worth billions of euros and to commit billions more in business deals.
In newspaper opinion pieces published in all three countries this week, Chinese officials emphasized Beijing’s support for European leaders as they seek to exit the crisis.
Having failed so far to dig Europe out of a hole or quell fears that the crisis will spread, European officials are welcoming Mr. Li’s spending spree.
This week, the Pacific Investment Management Company, the largest bond fund in the world, said it had stopped buying the government bonds of Portugal, Greece and Ireland, where bond yields have risen, reflecting concerns of a possible default.
In an interview with the German newspaper Süddeutsche Zeitung, Andrew Bosomworth, Pimco’s manager in Munich, said the fund was also not investing new money in countries that were solvent but considered risky, including Spain and Italy.
China, on the other hand, is looking to diversify some of its $2.7 trillion in foreign currency reserves away from United States Treasury debt and its low yields, and into other investments, including euro-denominated debt.
And China could profit handsomely if its pledges of support helped countries like Greece and Portugal avoid a restructuring.
On Wednesday, the Spanish news media reported that Mr. Li said China would buy 6 billion euro ($7.8 billion) worth of bonds from Spain.
Support for Europe could have another beneficial effect for Beijing. Although China is not saying how much debt it is buying, analysts said the mere pledge to buy debt made it difficult for investors to bet against the euro, helping to bolster the currency.
A sharply weaker euro, which has already slid nearly 10 percent against the dollar in the last year, would make high-quality goods produced in countries like Germany more affordable on world markets, providing a greater challenge to Chinese exports.
Continued purchases of troubled European debt could carry risks further out for China, especially since Europe has decided to force some sovereign debtholders to take losses for defaults on investments made after 2013.
If part of the Chinese strategy is to “ensure that they get repaid when others don’t, they’re kidding themselves,” said Kenneth S. Rogoff, an economics professor at Harvard and a former chief economist at the International Monetary Fund.
A further benefit redounds for China in its European strategy, analysts say. This week, Mr. Li presided over more than a dozen business deals with Spanish companies, including one between China Petrochemical and Repsol, Spain’s largest oil company, to expand oil exploration in Latin America.
Both Spain and Portugal have significant strategic holdings in Latin America and Africa, two parts of the world where China wants to continue expanding.
“Spain and Portugal are not as much a beachhead for China into Europe — how strategically important are they, really?” said Marko Papic, a senior Europe analyst at Stratfor, a geopolitical intelligence company in Austin, Tex. “But they do have these cultural, colonial and historic links to two regions that China is interested in.”
Mr. Li arrived in Berlin on Thursday for talks with the economy minister, Rainer Brüderle. On Friday, he is scheduled to meet with Mrs. Merkel; the German president, Christian Wulff; and the foreign minister, Guido Westerwelle.
German exports to China amounted to 36.5 billion euros in 2009, and imports totaled 55.5 billion euros. Germany is China’s biggest trading partner by far in Europe, and trade is surging, especially for high-value electrical and electronic goods. Germany’s car industry, which suffered during the downturn, has recovered thanks to an increase in Chinese demand.
But German companies want Mrs. Merkel to lobby for the ability to invest more in China. So far, Beijing has been noncommittal to such requests.
Instead, China intends to use this visit to ask Germany to open its doors further for Chinese investment.
Mr. Li’s visit is also seen as crucial in Britain, two months after Mr. Cameron helped win significant industrial orders during a trip to Beijing with ministers and business executives.
Mr. Cameron has pledged to strengthen economic ties with faster-growing economies, and hopes to build on his success in Beijing as a counter to a strict austerity program that is stifling the British economy.
China has made it clear, though, that its dealings with Britain are a part of its broader relations with the European Union.
“China alone may not be able to solve the problem for Europe,” Liu Xiaoming, China’s ambassador to Britain, wrote in The Telegraph on Tuesday, “but it is willing to help as a true friend and partner when Europe is in need.”
http://www.nytimes.com/2011/01/07/bu...Support&st=cse
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