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China warns Europe over its debt crisis

(China Daily)

09:22, September 26, 2011

WASHINGTON - China urged Europe to get to grips with its debt crisis before it risks causing bank runs and pushing the global economy into recession.

"The sovereign debt crisis must be resolved promptly to stabilize market confidence, and forceful and credible fiscal consolidation measures are needed in relevant economies to alleviate sovereign debt stress," central bank chief Zhou Xiaochuan said in a speech on Saturday at the International Monetary Fund.

He was attending the semi-annual gathering of the IMF and World Bank dominated by concerns about the risk that Europe now poses to the rest of the world. As European Central Bank President Jean-Claude Trichet put it on Friday: "We (the eurozone) are the epicenter of this global crisis."

World financial markets have been wracked by fears the Greek debt crisis could overwhelm other eurozone countries and their banks.

"A key element of cooperation is for each country to take matters in their own hands, take well-targeted measures and put their domestic house in order," Zhou told the IMF's steering body in a closed-door meeting.

Chinese officials and experts are showing discretion regarding just what China can do to help ease the European crisis.

It's "too early" to determine how emerging economies, including China, can further help the eurozone out of the sovereign debt crisis, Zhou said.

Talk about China's increasing role in bailing out the eurozone has been on the rise, especially after the media reported that Italy has conducted talks with the Chinese government on the possible purchase of Italian bonds.

But Vice-Chairman of China Investment Corp Gao Xiqing said that the national sovereign wealth fund can't be a "savior" of other countries. "We have our own policies and we have our own problems," he said during the IMF meeting.

He urged Europe to rethink its way of spending and living, while change some elements of its system that encourages borrowing money beyond one's means.

Zhou said that the country will strongly support the eurozone's efforts to achieve fiscal consolidation to combat crisis.

The governor was also "relatively optimistic" about prospects concerning the current crisis.

"We believe they are going to overcome the difficulty through reform," he said.

But he urged major advanced economies to adopt a "clear and credible" mid-term strategy, boost market confidence and prevent trade protectionism.

Some economists said China should rescue Europe, while others urged caution in extending a helping hand.

China should help Europe as it will aid efforts to escape the "dollar trap", Zhang Monan, economist with the State Information Center, said.

The chaotic situation in Europe has made investors seek a safe haven in the US by buying bonds and China has to follow suit to ensure the security of its foreign reserves, Zhang said. China's holding of US debt has been higher than $1 trillion for 14 consecutive months.

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Leave your comment8 comments

  1. Name

Nic at 2011-09-30175.141.84.*
Europe has its heydays with knowledge and wealth accumulated from their colonies. But the scenario is different now as many freed countries are improving themselves and can compete in many ways.What we will see in Europe is a diminshing return of whatever efforts they would like to put up to rescue themselves.Europe makes up of many small countries. Unless it resembles China which has a strong central government controlling all the provinces, the likelihood that they are to be able to survive and prosper individually is dim.Do they have rich natural reources like Russia? Else, what hope they could place to get out of this mess?
Francisco J Lee at 2011-09-2865.208.187.*
Scape the dollar trap to fall into the euro?. That's foolish.The Almighty
PD User at 2011-09-2780.94.16.*
2011-09-27.Unorfunaltely all Europe to be freak's.Wealthy liberties to beg in poor China.Wonderful european economist's to start to teach in socialist chinese school.Think's a own pocket's to support UE gift's-tent's,blanket's and goodword's a international free-democracy union's a idea.
PD User at 2011-09-27174.6.38.*
While it may not be "fair" to help, if your trading partners go under, there will be no one remaining to buy your goods. Which could lead to a weaker economy for you. When that happens, your jobs become be threatened with layoffs. Who will you turn to for help if the rest of the world is on life support. Face it, everyone shares this problem together. It"s not your problem, or my problem. It"s our problem. (I live in Canada).
PD User at 2011-09-27117.120.16.*
The end game for EU is either a crippled EU or a collapsed EU. Genrmany is doing the sum to calculate cost-benefits on which way to go on its own 15 years painful experience of West Germany saving East Germany.

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