20th Oct 2016

China to EU: We'll back the euro if you open your markets

  • China holds over €2 trillion in foreign currency reserves, giving it a vested interest in protecting the euro (Photo: dolmansaxlil)

China has offered to help save the euro in return for getting EU recognition as a 'market economy' - a new status that would help it to export more cheap goods to Europe.

Chinese premier Wen Jiabao made the offer at a meeting of business leaders and officials organsied by the World Economic Forum in Dalian, China, on Wednesday (14 September).

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"European countries are facing sovereign debt problems and we've expressed our willingness to give a helping hand many times. We will continue to expand our investment there", he said. "Based on WTO rules, China's full market economy status will be recognised by 2016. If EU nations can demonstrate their sincerity several years earlier, it would be the way a friend treats a friend", he added.

A European Commission spokeswoman on Thursday played down the importance of the remarks.

Wen in a recent phonecall with commission head Jose Manuel Barroso made "no linkage whatsoever" between eurozone support and the new status, she said.

She added that commission officials are working "intensively" on the market economy negotiations.

The new status would change the way the EU calculates whether or not it is entitled to impose tariffs on Chinese exports in order to protect EU manufacturers.

Currently, the EU compares Chinese export prices with those of other low-cost exporters to see if it is "dumping" excessively cheap goods. If it becomes a market economy, the EU will have to compare its export prices with domestic Chinese prices instead, meaning fewer products will make the dumping grade.

The EU as of June had 55 anti-dumping measures in place against China. The EU-China trade deficit hit €169 billion last year.

Wen spoke out the same day that the US think-tank, the German Marshall Fund, published a survey showing that Europeans are less afraid of China than Americans.

Forty six percent of Europeans - the biggest segment of those polled - see China as more of an economic opportunity than a threat and 62 percent do not think it poses a military danger. In contrast, 63 percent of Americans see it as an economic threat and 47 percent see it is a military adversary.

The most pro-China EU countries out of the 12 covered by the study are Romania, Bulgaria, the Netherlands, France, Portugal, the UK and Spain. Germany, Italy and Slovakia were at the other end of the scale.

Despite its China-wariness, Italian officials last week met with China's sovereign wealth fund, the China Investment Corporation, in Rome, amid speculation that China will buy Italian government-owned assets.

"They are interested in buying real stuff ... this is completely different from their approach in the US which was to invest in treasuries [government bonds]", an unnamed Italian official told the FT on Tuesday.


Europe ready to tackle Greek debt relief

The Greek government has built and broadened alliances in EU institutions and member-states that acknowledge the need to restructure the debt and deliver another economic model for the eurozone.

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