Hope for eurozone debt as China indicates it may help in bailout

Nigeria Sun Friday 3rd February, 2012

BEIJING - China, the holder of one of the world's largest foreign exchange reserves, has indicated it may get "more deeply involved" in resolving the European Union debt crisis.

This was stated by Chinese Premier Wen Jiabao at a joint press conference with German Chancellor Angela Merkel at the Great Hall of the People in Beijing Thursday.

China "is investigating and evaluating concrete ways in which it can, via the IMF, get more deeply involved in solving the European debt problem through the EFSF and ESM channels," Wen said.

The ESM or European Stability Mechanism is a 500-billion-euro ($650 billion) permanent bailout fund that is due to become operational in July. It is expected to replace the EFSF or European Financial Stability Facility, a temporary fund that has been used to bail out Ireland and Portugal and will help in the second Greek package.

China has $3.2 trillion worth foreign exchange reserves, one of the largest in the world, and according to estimates, about a quarter of it is in euro assets.

Wen said it was increasingly "urgent" that a solution is found to the European debt crisis. He also called upon the international community to co-operate.

His comments have revived hopes that China may contribute to the existing and future European bail-out funds.

The euro rose about half a per cent against the US dollar soon after his comments.

Merkel, who arrived in China Thursday on her fifth visit to the world's most populous country as chancellor, told reporters that Chinese leaders had emphasized during their meeting with her that Europe must rely on itself to solve its own problem.

"China. is ready to work for a stable euro in its general responsibility for a stable global economy," said Merkel, who is on a three-day visit to Beijing.

Merkel arrived in Beijing from the European Union summit, where leaders this week inked a treaty for more stringent debt rules.

She met Chinese President Hu Jintao Friday. She later said that she and Wen had spoken about global economic issues and agreed on working to solve matters through the Group of 20.

On Thursday, she told an audience of Chinese scholars that European countries were taking serious steps to rein in debt and strengthen growth.

"I want to tell you: The euro has strengthened Europe," Merkel said in a speech at the Chinese Academy of Social Sciences, one of the country's leading academic institutions.

"This is not a crisis of the euro, it is a debt crisis and a crisis of different levels of competitiveness," she said.

The Chinese offer may be discussed in more concrete terms in two weeks at a delayed EU-China summit.