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China Unlikely to Rescue Italy or Europe: Strategist

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  • #16
    Europe Turns to Asia for Help With Bailout - WSJ.com

    By MARTIN VAUGHAN in Singapore, DINNY MCMAHON in Beijing and BOB DAVIS in Washington

    European officials have quickly turned to Asia to help bankroll their plan to ease Greece's debt obligations and prevent its fiscal collapse—but it won't be an easy sell.

    Europe had dialed up Asia in search of funds to help prevent a financial collapse. WSJ's Bob Davis reports.

    French President Nicolas Sarkozy called his Chinese counterpart, Hu Jintao, just hours after the deal, and the head of the euro zone's bailout fund was heading to China and Japan, cap in hand. But both Asian powerhouses have made clear that while they are willing to help Europe, they will invest on their own terms.

    Mr. Sarkozy's office put out a statement saying he spoke with Mr. Hu to inform him of the euro-zone rescue package, and that the leaders also discussed the priorities for next week's Group of 20 summit in Cannes.

    The visit by Klaus Regling, of the European Financial Stability Facility, or EFSF, probably won't bear fruit immediately, as China has stressed it would contribute only through the International Monetary Fund and in conjunction with Brazil, India and Russia, the other major emerging economies that together with China make up the so-called BRIC nations.

    "China wants to be a responsible global citizen. It's not impossible that it would put up some money to show its support. But clearly it would prefer to go through the multilateral route," said Dong Tao, chief regional economist for Credit Suisse in Hong Kong.

    According to people at the International Monetary Fund, for a least a month China has expressed its willingness to help the Europeans, but only through the IMF and in conjunction with contributions from other countries. Above, IMF Managing Director Christine Lagarde on Wednesday.
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    European leaders secured a deal Thursday to reduce Greece's debt and expand the firepower of the euro zone's bailout vehicle, by four- or five-fold, suggesting it could provide guarantees for around €1 trillion, or about $1.4 trillion, of bonds issued by flailing EU member countries. The expansion could in part be funded by cash-rich emerging economies such as China.

    China's Ministry of Foreign Affairs on Thursday said China welcomes the conclusion of the euro-zone leaders' summit and believes it will be conducive to the global market. Ministry spokeswoman Jiang Yu said China is willing to step up cooperation with Europe in various areas, but declined to comment on whether China would be investing in a special rescue fund.

    Mr. Regling next week will visit Japan, which has already purchased around 20% of the debt issued by the EFSF and has signaled it may be ready to buy more. He is scheduled to visit Hong Kong and Thailand in December, and Singapore early in 2012, but it was unclear whether he would accelerate any of those visits in light of the EFSF's pressing funding needs.

    Japanese Finance Minister Jun Azumi on Thursday said Tokyo is ready to take measures to support Europe, but didn't offer specifics as to what those measures would be.

    "A stable Europe will be in the interest of our nation. From that standpoint, we will take necessary measures in a timely fashion," Mr. Azumi said during a parliamentary debate.

    A big investment by China into Europe's bailout fund would mark a major change in the way China allocates its foreign-exchange reserves. China's State Administration of Foreign Exchange allocates the lion's share of its resources to low-risk—and low-yield—investments. While the low return has long been a source of frustration, the reserve administrators are wary of a political backlash should the national reserves post a significant loss.

    China's $400 billion sovereign-wealth fund, China Investment Corp., is fully invested and currently doesn't have the resources to make a significant contribution to Europe's bailout.

    An investment through the IMF could take days or weeks to work out, and the Nov. 3-4 meeting of the G-20 industrial and developing nations in Cannes, France, would be the logical venue for progress toward that end, analysts said.

    "There is an understanding that China is potentially part of the solution, but European officials cannot rely on China or other BRIC economies to be the ultimate backstop," said Olivier Desbarres, head of foreign-exchange strategy Asia-Pacific at Barclays Capital.

    Mr. Desbarres said the euro's rally Thursday in Asia showed that markets see the euro-zone plan as credible, regardless of whether China participates. The euro climbed from $1.3903 before a deal was announced in Brussels, early Thursday morning in Europe, to $1.4016 late in the Asian trading day.

    Still, Chinese leaders may calculate that helping Europe get back on its feet will win goodwill that could lead to payoffs elsewhere. China is seeking recognition from the EU as a "market economy," a status that would help its chances of winning antidumping or subsidy cases brought against it.

    It is also preparing a proposal for the Cannes G-20 meeting on allowing the yuan to join the euro, U.S. dollar, pound and yen as a component of the IMF's special drawing rights.

    European leaders have thus far rejected such a quid pro quo.

    "China should ride to Europe's rescue," said Peng Junming, a former official at the People's Bank of China who now serves as chief investment officer of Empire Capital Management LLP, an investment-management firm in Beijing. Mr. Peng sees it as a way to get a better return for the reserves.
    —Junting Yolanda Zhang, Kersten Zhang and George Nishiyama contributed to this article.

    Write to Dinny McMahon at [email protected] and Bob Davis at [email protected]
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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    • #17
      China set to boost eurozone rescue fund: FT
      AFP: China set to boost eurozone rescue fund: FT
      (AFP) – 2 hours ago

      LONDON — China is ready to pump money into the eurozone's bail-out fund if European leaders can convince it the investment is safe, senior government advisers told the Financial Times.

      And another source told the paper the cash-injection could possibly top $100 billion (70.5 billion euros).

      China needs assurances that other countries would contribute to the fund, which will be used to buy debt issued by countries in financial difficulties, the business daily reported.

      It also needs to be sure that European leaders will refrain from criticising China's foreign exchange policy, the FT added.

      Li Daokui, an academic member of China's central bank monetary policy committee, told the paper it was in China's "long-term and intrinsic interest to help Europe", which is the Asian powerhouse's leading trade partner.

      Li admitted the Chinese government might face domestic opposition, and that it needed to convince the people that China was not "just a source of dumb money."

      Another source told the paper that China might be willing to contribute between $50 and $100 billion dollars.

      "If conditions are right then something a bit above $100bn is not inconceivable," the source added.

      French President Nicholas Sarkozy announced at a summit in Brussels Thursday that eurozone leaders had agreed to leverage the 440-billion-euro European Financial Stability Facility to a trillion euros ($1.4 trillion).

      Finding creditors to boost the fund is one of the keys to successfully implementing the plans, along with making banks agree to write down billions in Greek debt and recapitalising the banking sector so it can absorb the hit.

      The rescue fund, the main weapon against the crisis, has already bailed out Portugal and Ireland, and would be tapped in a new Greek bailout.
      “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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      • #18
        Originally posted by editec View Post
        I concur.

        And personally, I do not think it's all just stemming from people buying commidities futures as a HEDGE against a crashing dollar.
        Even at the height of oil prices in 2008 pump prices were not this high, something is fishy here. Personally I highly suspect these oil companies.

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        • #19
          Originally posted by xinhui View Post
          China set to boost eurozone rescue fund: FT
          AFP: China set to boost eurozone rescue fund: FT
          It also needs to be sure that European leaders will refrain from criticising China's foreign exchange policy, the FT added.
          As if the EU has been making any noise at all. The US has been a lone voice in this one, everyone else had their bowed down in inaudible mammers.

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          • #20
            China shuns EU bailout fund

            China shuns EU bailout fund - China.org.cn

            After a painstaking negotiation yesterday afternoon at the G20 Summit in Cannes, the Chinese government decided not to invest in the special purpose investment vehicle proposed by the European Financial Stability Facility, shattering the eurozone's hopes of receiving a fiscal lifeline from China.

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            • #21
              Originally posted by Zinja View Post
              Even at the height of oil prices in 2008 pump prices were not this high, something is fishy here. Personally I highly suspect these oil companies.
              It reached $147/barrel during the last peak.

              How high is it now ?

              Comment


              • #22
                China wants guns and butter for European debt
                Emerging Money

                China wants guns and butter for European debt - NASDAQ.com
                Article Tools:


                Posted 2/6/2012 8:47 AM by Emerging Money> from Emerging Money in Investing, International, Stocks
                0 comments | Like itDon't like it

                German Chancellor Angela Merkel found out last week from Chinese Prime Minister Wen Jiabao what tributes would be extracted for China underwriting a Eurozone rescue package. It looks like the Chinese want both guns and butter.

                According to New York Times reporters Keith Bradsher and Liz Alderman, China wants to buy military products from Europe and be able to sell more goods at reduced tariffs on the continent. No word on first-born male children yet.

                Europe has rebuffed these requests before, but times are changing fast. As detailed previously on Emerging Markets | Tim Seymour | Emerging Money , Greece is expected to default on its debts on March 20. There have been nearly 20 summits to resolve the European debt crisis, and the only result has been ratings agencies downgrading France, Austria and other countries.

                China can afford to prolong the pain for Europe. The worse things get for the Eurozone, the higher the interest rates that will have to be paid on the bonds. And where else are the European nations going to get help?

                Russia can only offer a $20 billion bailout. The United States is already helping with swaps. Neither country can spare enough resources to offer a long-term solution. Meanwhile, China has over $3 trillion in foreign reserves, by far the most of any country in the world.

                In the end, the Europeans have nowhere else to turn -- and the Chinese know it.

                The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

                Read more: China wants guns and butter for European debt - NASDAQ.com
                “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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                • #23
                  While it is true that the Europeans have nowhere else to run, it is also true Chinese can't find a market to replace the European one.
                  No such thing as a good tax - Churchill

                  To make mistakes is human. To blame someone else for your mistake, is strategic.

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                  • #24
                    let the horse trading begin.
                    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

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