Thursday

22nd Oct 2020

China supports EU rescue amid export fears

  • Commission President Jose Manuel Barroso and Chinese Premier Wen Jiabao last month (Photo: ec.europa.eu)

China has come out in support of Europe's recently agreed bail-out packages for Greece and other vulnerable eurozone countries, amid concerns the continent's weakened consumer demand and single currency could hit Chinese exports.

Chinese Premier Wen Jiabao offered his support in a telephone call on Monday (10 May) to Spanish Prime Minister Jose Luis Rodriguez Zapatero, whose country currently holds the EU's rotating presidency.

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"We have noted the rescue mechanism for Greece organised and launched by the eurozone and the International Monetary Fund," said Mr Wen according to reports in the Chinese state news agency Xinhua.

"China firmly supports the above actions and believes that each member of the eurozone can overcome the difficulties and realise stable economic growth," he added.

Euro area leaders signed off on a €110 billion bail-out for Greece over the weekend, and paved the way for EU finance ministers to agree a €750 billion support mechanism in the earlier hours of Monday morning, in case other states should also need to request aid. Both packages include money from the IMF.

With the knock-on effects of Greece's debt crisis spreading beyond Europe's borders, sending share prices into free-fall across the globe late last week, a number of analysts and politicians have criticised the speed of Europe's eventual reaction.

Europeans "waited too long" with the Greek bail-out and fueled speculation about the fragility of the entire eurozone, one US official told the New York Times on Monday. "Had they acted sooner ... they might have gotten away with less."

Chinese diplomats in Brussels were less confrontational, however. "We understand the necessary process of policy deliberation," Wang Xining, spokesman for the Chinese mission to the EU, told this website.

Beijing's support for the European package is likely to be a least partially motivated by concerns over falling exports, with the EU the number one destination for Chinese products.

Tuesday's edition of the state-run China Daily newspaper says the country's holdings of Greek government bonds are limited, meaning a Greek default would have a limited direct impact on government coffers.

But the spread of Greece's current woes to Spain and Portugal would leave China facing "bigger risks".

"Once the fragile EU economic recovery was again drawn into the plight of this debt crisis, China's export situation will become even more complicated," says the paper.

According to Chinese statistics, China's exports to Europe reached $236.28 billion in 2009, a drop on previous years due the global economic recession.

EU producers have long complained about China's artificially low currency, the yuan, and are currently enjoying the increased price competitiveness brought by the euro which has weakened considerably since the Greek crisis started.

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