Hopes are growing that cash-rich China will take a major role in a European debt crisis rescue – expectations that are likely to be dashed.
French President Nicolas Sarkozy and his Chinese counterpart, Hu Jintao talked today by phone and pledged to co-operate to revive global growth but there was no word on whether Beijing might contribute to Europe’s bailout fund.
The fund’s chief executive was due on Friday to visit Beijing to talk to potential investors.
Beijing has expressed sympathy for the European Union, its biggest trading partner, but has yet to commit any cash.
Joining in a bailout could help Beijing in its campaign to join the top ranks of governments that manage the global economy – a leadership role that many around the world have been urging China to take.
So far, Beijing has promised to help only by continuing business as usual, trading with Europe and stockpiling some of China’s multibillion-dollar trade surpluses in the safest European government bonds.
“For China, this could be a very big break in its efforts to take the seat at the head of the table in the international monetary hierarchy,” said Carl Weinberg of High Frequency Economics in a report.
Still, getting directly involved would put Chinese leaders in a position that is fraught with political risk – spending public funds to bail out European countries that despite their debt crisis are still far richer than China per person.
Managers of China’s sovereign wealth fund, a potential investor, have tried to maintain an image as careful financial guardians after they faced criticism when early investments abroad failed to perform well.
During a visit to Paris this month, the Chinese fund’s chairman said Europeans should “respect yourself” and stop “expecting charity from China”.
European leaders are looking for investors outside the 17 nations that use the euro, including sovereign wealth funds, for a fund to backstop the main bailout fund, the European Financial Stability Facility.