Will China Buy Europe?

China likely to move soon on aid for Europe

China likely to "move shortly" to help Europe resolve its debt crisis by providing an investment of as much as 100-B Euros (US$132-B), said Yuan Gangming, an economist at the Chinese Academy of Social Sciences.

The money would probably go to the European Financial Stability Facility, the Euro bailout fund, said Yuan, adding that the forecasts are his own and do not necessarily represent government plans.

Economists from the academy provide policy advice without direct involvement in decisions.

Helping Europe is like "hitting 2 birds with one stone," Yuan said in an interview in Beijing on 6 February. The action would have many benefits and few drawbacks, Yuan said.

China, sitting on the World's largest Forex reserves at more than US$3-T, has signaled a stronger willingness to aid Europe, which is the largest market for its exports.

Chinese Premier Wen Jiabao traveled with German Chancellor Angela Merkel last week to Guangdong province, a hub for factories making electronics, shoes and toys for export, and said there that helping Europe would be helping China itself.

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China may initially invest tens of billions of Euros and later increase the amount to 100-B Euros or even more, said Yuan, who is also a researcher at Tsinghua University's Center for China in the World Economy. Another option is for funds to go toward the International Monetary Fund's bailout program, he said.

Providing funds will help stabilize the crisis while allowing China to reap investment returns, improve its image and have a greater say in European and global financial talks, he said. Greek Prime Minister Lucas Papademos is currently negotiating terms for a rescue package for his nation as European leaders seek to limit contagion.

China's investment will be "meaningful" to the market as it will ease concerns about debt default and shore up confidence, Yuan said. "It will also be a safe investment because European nations remain rich. They have just borrowed too much and run into temporary funding difficulties."

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
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