Central bank governor: China always confident in euro

15:55, July 25, 2011      

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China welcomed European Union's agreement on the 109 billion euro bailout plan for Greece and has been confident of the stability of the euro zone and other member countries in the past, present or future, said Zhou Xiaochuan, governor of People's Bank of China on July 23 during an interview with Financial Times.

Bailout plan helps bring financial stability

After eight hours of negotiation, euro zone leaders agreed on July 21 local time in the Belgium capital Brussels on a new 109 billion euro bailout for Greece, with private bondholders contributing 37 billion euro.

Zhou said China welcomed the agreement by the euro zone and European Union leaders on the second-round bailout plan for Greece and a crisis management mechanism for the euro zone on July 21 to ensure debt remains sustainable in the euro zone and prevent the debt crisis from further expanding.

Such moves can help solve the sovereign debt problem, maintain financial stability in the euro zone and other member countries, safeguard market confidence as well as enhance the strong, sustainable and balanced growth for the European Union and global economic recovery as a whole, he said.

Zhou expresses support for European financial market

In addition, Zhou also lent great support to the European financial market. He made it clear that China, as a responsible investor in the international financial market, has always had confidence in the euro zone and euro. Whether in the past, present or future, the European financial market has always been one of China's main investment markets.

According to market analysis, euro capital accounts for some 20 percent of China's foreign exchange reserves.

Li-Gang Liu, head of Greater China Economics under the ANZ Banking Group, said that the E.U. bailout package put Greece in technical default. Euro zone leading countries, such as France and Germany, also reached agreement on this kind of "extraordinary" method to solve the debt crisis in Greece. It is a major victory for Greece and shows that the euro zone chose to avoid a possible system crisis with a swift solution, but it carries risk.

Liu said that there would be more severe risk factors for the euro zone if the debt crisis in Greece continues to spread and worsen.

By Zhang Xinyi, People's Daily Online

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