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Eurozone may look to Beijing for funds

By Fu Jing  (China Daily)

08:05, October 11, 2012

Beijing and Brussels may enter into talks over boosting the lending capacity of Europe's permanent bailout fund to 500 billion euros by 2014.

Exchanges could be held in Japan when Chinese and European financial decision-makers meet for the annual IMF and World Bank conference this week.

Some observers have warned Beijing that further investment in European bonds could be risky as there is little sign of economic recovery.

"I will meet decision-makers from Asia when I am in Japan soon," said Klaus Regling, managing director of the new bailout fund, the European Stability Mechanism, on the sidelines of the fund's inauguration on Monday.

European politicians cheered the fund's establishment as a milestone after years of struggling to find a sovereign debt solution.

Regling said the European Union needs steady support from major Asian creditors such as China and Japan.

"I am confident that the relationship with "traditional and good" Asian customers will continue when the ESM issues bonds," he said,

He added that Asian countries had on average purchased 40 percent of bonds issued by the ESM's predecessor, the European Financial Stability Fund.

Regling's comments come on the heels of a September summit between Beijing and Brussels, where Premier Wen Jiabao said China had offered substantial support to debt-ridden European countries via the IMF, EFSF and some key sovereign wealth funds of specific countries, and would provide more.

Chinese ambassador to Belgium Liao Liqiang repeated Beijing's commitment last week, saying China would offer more financial support once the ESM was operational.

Official data on China's total buying of European bonds is not available. However, some figures show that Chinese and Japanese institutions were major buyers.

There are no imminent plans for the ESM to issue bonds, but once it does, Asian countries will likely continue their previous level of European bond investing, Regling said.

However, Duncan Freeman, a senior researcher at Brussels Institute of Contemporary China Studies warned over the possibility of China buying more European bonds.

"Risk is a key factor for the Chinese government," he said.

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