{"id":125860,"date":"2011-10-28T10:15:54","date_gmt":"2011-10-28T17:15:54","guid":{"rendered":"http:\/\/chinadigitaltimes.net\/?p=125860"},"modified":"2011-10-28T10:15:54","modified_gmt":"2011-10-28T17:15:54","slug":"europe-turns-to-china-to-bolster-rescue-fund","status":"publish","type":"post","link":"https:\/\/chinadigitaltimes.net\/2011\/10\/europe-turns-to-china-to-bolster-rescue-fund\/","title":{"rendered":"Europe Turns to China to Bolster Rescue Fund"},"content":{"rendered":"

With the ink drying on a potential agreement to stabilize the European financial markets, the head of the European bailout fund arrived in Beijing on Friday as EU leaders look for China to further tap its reserves in support of the rescue package<\/strong><\/a>. From Bloomberg:<\/p>\n

The European Financial Stability Facility may explore setting up a special purpose vehicle with the IMF, Klaus Regling, the EFSF\u2019s chief executive officer, said at a briefing in Beijing today. Separately, Chinese Vice Finance Minister\u00a0Zhu Guangyao said his government wants to hear about particulars such as the extent of loan guarantees to countries including\u00a0Italy, and how the senior-debt portion would be structured.<\/p>\n

European leaders aim to tap China, holder of the world\u2019s largest foreign-exchange reserves, for help after moving yesterday to contain the crisis by writing down Greek debt and targeting an expansion of the EFSF to about $1.4 trillion. China may seek to increase its influence at the IMF, a global lender of last resort, as a quid pro quo for contributing, said Tomo Kinoshita, an economist at Nomura Holdings Inc.<\/p>\n

…<\/p>\n

French President Nicolas Sarkozy spoke with Chinese counterpart Hu Jintao by phone yesterday and the two agreed to \u201ccooperate closely\u201d to ensure global growth and stability, Sarkozy\u2019s office said in a statement. Regling said that he didn\u2019t expect a \u201cprecise outcome\u201d from talks with Chinese officials during his trip.<\/p><\/blockquote>\n

While China has incentive to support its largest trade partner, The New Yorker’s Evan Osnos writes that it\u00a0will need to satisfy a public which is questioning the logic of assisting the Europeans when problems persist back home<\/a><\/strong>:<\/p>\n

By Friday afternoon, China was edging toward a plan that could free up a hundred billion dollars, but it still faced one potentially enormous source of opposition: its own citizens. \u201cThe chief concern of the Chinese government is how to explain this decision to our own people\u201d Li Daokui, a member of China\u2019s Central Bank Monetary Policy Committee, told the Financial Times. Based on the Chinese reaction on Friday, Li knows his constituency. \u201cWhy do we, once again, have to give what we\u2019ve earned\u2014through blood, sweat, tears\u2014to those rich and lazy Europeans?\u201d commentator Songzhe wrote on on Weibo, the Chinese equivalent of Twitter.<\/p>\n

…<\/p>\n

For the European plans to succeed, Sarkozy and others will need to find creditors willing to boost the fund, and Chinese reaction immediately gravitated to the sense that this help should not come cheap. \u201cYou want support? Fine, on these conditions,\u201d commentator\u00a0BillyBW began. \u201c1. Recognize China\u2019s market-economy status right away; 2. Never again mention Taiwan, Tibet, Xinjiang, and the South China Sea; 3. Allow China to purchase high technology in the fields of weaponry, aviation, information technology, pharmaceuticals, environmental protection, industrial manufacturing, etc. President Hu should learn from Kim Jong-il: Don\u2019t hand over a dime without asking for the world in return.\u201d<\/p><\/blockquote>\n

In The New York Times, Arvind Subramanian argues that China should provide relief to Europe via the IMF rather than directly backstopping the bailout fund<\/a><\/strong>, and that European leaders would be wise to entertain China’s conditions:<\/p>\n

China should demand nothing less than a wholesale revamping of the governance of the I.M.F. to reflect the current economic realities. Governance reform can no longer be just about the nationality of the I.M.F.\u2019s managing director but should fundamentally be about who will have the greatest voice and exercise the most power in the new world.<\/p>\n

Today, the United States and Europe each have effective veto power in the I.M.F. because important decisions require an 85 percent share of the vote. If China were to become the I.M.F.\u2019s major financier it should have veto power on terms equivalent to those of the United States. Europe\u2019s power should be reduced commensurate with its transition from creditor to potential borrower status. Supplicants, China should insist, cannot have veto power in a financial institution.<\/p>\n

The Chinese government could then trumpet a nationalist achievement \u2014 equal status as the United States, and a greater status than that of Europe, in running the world\u2019s premier financial institution \u2014 as the return for investing its cash abroad.<\/p>\n

These demands would be legitimate and indeed be welcome for the world because they would tether China more firmly to, and create a stake for it in, the multilateral system. Those in the United States and Europe who would resist these changes should remember that the alternatives are worse. A China that uses its might bilaterally to gain narrow political advantages would be a worrying portent for the future when China becomes economically bigger and stronger. And a China that refuses to take the phone call at all could well push Europe off the cliff. Europeans are running out of options; debtors cannot be choosers.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

With the ink drying on a potential agreement to stabilize the European financial markets, the head of the European bailout fund arrived in Beijing on Friday as EU leaders look for China to further tap its reserves in support of the rescue package. 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