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Italy bond purchase may be on the cards

(China Daily)

08:40, September 14, 2011

BEIJING - China's potential purchase of Italian bonds may help diversify the world's largest foreign exchange reserves and boost investor confidence in European markets, some analysts said.

But others doubted whether China would actually go ahead with the purchase.

Speculation on a bond purchase arose after Italian Treasury spokesman confirmed on Tuesday that Italian Economy Minister Giulio Tremonti met Chinese officials last week.

The Financial Times reported that Italy, the euro zone's third-largest economy, had asked China to buy "significant" quantities of its debt.

The Wall Street Journal also reported that Italy was hoping China would buy "large amounts" of debt.

Buoyed by the reports, European shares rose sharply in early trade on Tuesday, following market tension across Europe on Monday.

Similar reports that Beijing was buying peripheral euro zone bonds have not proved conclusive in the past, according to Reuters.

"It wouldn't be the first time the market had hoped that China would ride to the rescue," Jeremy Batstone-Carr, strategist at Charles Stanley, said.

"But the Chinese don't have a great track record. They participated in the Portugal bonds this year, and they lost money."

The Italian Treasury spokesman declined to comment on the substance of the meeting with a delegation that a second source said included the head of China Investment Corp (CIC) Lou Jiwei and officials in charge of investment. Separate meetings were held with Italian investment agency Cassa Depositi e Prestiti.

In Beijing, the State Administration of Foreign Exchange, the nation's manager and regulator of the foreign exchange reserves, declined to comment on the reports.

The CIC, the nation's sovereign wealth fund managing $300 billion, refused to comment either.

Analysts estimate that about a quarter of China's record foreign currency reserves of $3.2 trillion is in euro assets.

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Leave your comment3 comments

  1. Name

PD User at 2011-09-15175.141.34.*
China has $$$.West Has no $$$ but advanced technology which China wants. But West will not sell to China.So how? Should China just give $$$ or buy their toxic bonds and expect nothing in return? How would the leaders answer to the people who own the $$$?No one-sided affair? The West should think of win-win between China and them.Nic.
ood at 2011-09-15120.166.36.*
These days the world has watched that China acts as the master, while the west it"s looks like the beggar who asking for help loan money from China.
Roberto Casiraghi at 2011-09-1493.50.152.*
If China thinks of the strategical importance of Italy from the geopolitical point of view, buying debt in exchange for influence could be a very wise decision. At the moment the main influence in Italy are the US but Italians realise that the US are slowly declining and many would be more than happy to see China counteract the influence of the US in our country. So it"s up to China to seize this unique opportunity that may not be available in the future if the Eurozone should be either irreversibly degraded or recover without China having had a part in the recovery process.

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