China is nervous about its decision to buy European bonds to alleviate the sovereign debt crisis, and is linking it to the country's continued support for reforming global governance in its favour, EURACTIV has learned.
Speaking at the annual Rhodes Forum last Saturday (8 October), an influential Chinese policy adviser told delegates: “Whether China should provide further support for the Euro has already become a hot topic not only in Europe, but also in China.”
Zhang Haibing, deputy director at the Shanghai Institute for International Studies centre of world economy – which provides the Beijing government with policy briefs – said that China was in two minds on the matter.
“One says we should support it because we have no choice – Europe is too big of a partner. But on the other hand, some say we shouldn’t support the European Union in its debt crisis.”
China is afraid of being ‘trapped’
According to the Chinese analysts, critical voices in the government proned caution. “We are already in the trap of the US dollar, and [the question arises] whether we should jump into another trap of the Euro,” she said.
Zhang subsequently spelled out priorities of China’s strategic thinking, clearly indicating that Beijing is demanding reform of the global governance system to give itself more clout.
She said the global governance system “is not in our favour” calling for a model in which there would be “negotiated orders not imposed orders, which means each national economy having the right to contribute.”
“The question is will you pay us back?” a Chinese government source told EURACTIV yesterday (12 October), asked about nervousness in Beijing about investment in European bonds.
“Europeans must understand that hardworking families in China have little conception of these sums,” the source said.
It is much harder to convince the Chinese people we should help Europe, when the West fingerpoints China's refusal to revalue the Renmimbi, the source added.
Asked if Europe would repay China, a Commission official said: “It’s the whole world that is looking at the EU and our response to the current crisis[… ] there are clearly high expectations among our international partners, including China, whose economy has strong ties with the EU and the euro area.”
The official added: “We must provide a comprehensive response to all these interlinked challenges. We acknowledge that there are concerns among all our partners, not just China.”
Grassroots arguments appeal to ordinary Chinese
The Chinese government source said that the critical voices were using “grassroots” arguments, a buzzword for attempts within the communist party to reflect more fully the views of ordinary Chinese.
Elsewhere at the Rhodes forum – which was funded by Russian railway manager Vladimir Yakunin – there was heated debate about the extent to which the Euro is coming under pressure.
Italian economist Paolo Raimundo said that there was a clear “speculative attack” against the currency. He said both European and US banks were responsible for this, but said that the underlying reasons related to the shift away from the dollar as the world’s reserve currency.
He called for a European economic defence ministry to be set up at short notice to take political steps necessary to stem speculation.
Meanwhile his compatriot, professor Domenico Nuti, said that sovereign debt default may be the necessary exit from the crisis. He said such a default would be costly, “because it involves the cost of recapping banks on a larger scale including the central banks”.
The price of not defaulting could be costlier, however, he told delegates: “Look at the losses in the EU stock exchanges, it is a tax on the rich but not only on the rich, but it doesn’t benefit the governments.”