27th Sep 2023

Beijing promises to buy Greek bonds

Chinese Premier Wen Jiabao has embarked on a one-week European tour, vowing over the weekend to buy Greek government bonds when Athens decides to return to international markets.

In a speech to the Greek parliament on Sunday (3 October), Mr Wen also said China had no plans to reduce its holdings of eurozone sovereign bonds in general, and pledged its support for a strong Europe.

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  • Greek troubles threatened to break apart the eurozone earlier this year (Photo: John D. Carnessiotis, Athens, Greece)

"We have stayed at Europe's side to overcome the crisis and to allow the recovery," Mr Wen told Greek parliamentarians ahead of his visit to Brussels this week for a meeting of Asian and Europe leaders (ASEM), followed by a bilataral EU-China summit.

The news will come as a welcome fillip to the Greek centre-left Pasok administration, currently battling against an economy in recession and citizen opposition to tough austerity plans.

Reports suggest that Athens may look to test investor appetite with a bond issue at some point next next year, despite current bond yields that remain in double digits and having successfully secured a €110 billion EU-IMF loan in May that should tide it over until 2013.

With government spending cuts likely to further dampen domestic demand, Athens is increasingly relying on foreign investment and growing export numbers to lift the country's economy, say analysts.

A promise by Mr Wen to double bilateral trade volumes with Greece over the next five years will therefore also come as further good news, as will the signature of deals on investment and tourism and the establishment of a new fund to assist Greek shipping firms in the purchase of Chinese ships.

But the soothing statements were accompanied by a call for Europe to end its barriers to high-tech exports to China and for the 27-member bloc to recognise China's market economy status, a long-standing request that would limit the EU's room to impose anti-dumping duties on Chinese imports.

Discussions in Brussels are set to be more prickly, with Asian leaders likely to pressurise Europe to review the number of seats it holds on the board of the IMF. A recent European offer appears unlikely to gain approval at the IMF's annual meeting later this week.

Under the proposal, Europe said it would share with emerging nations two of the continent's eight executive-director seats on a rotating basis among the smaller European countries. The board currently has 24 seats.

Conversely, China is expected to come under pressure during currency talks on Wednesday morning over the value of its renminbi, with US lawmakers recently passing a bill that would punish China for the alleged undervaluation.

Mr Wen will finish up his European tour later this week with visits to Turkey and Italy.

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