Bailout fund chief in Beijing talks

Europe’s bailout fund chief is visiting Beijing to discuss possible terms for a bond sale aimed at raising money from China and other non-European investors.

Klaus Regling, chief executive of the European Financial Stability Facility, said today he was not holding negotiations with China as a potential investor.

He said the fund was still talking to investors to decide the terms for raising new bailout money authorised this week by European leaders.

The eurozone agreed this week to increase the EFSF fund’s size from €440bn to as much as one trillion euro with money raised from outside investors, including sovereign wealth funds.

Mr Regling said China had purchased EFSF bonds before, but declined to say how much.

The European bailout fund is developing two schemes to increase its financial firepower. The first would allow the fund to act as an insurer for bonds issued by weaker governments such as Spain or Italy. The second would be a fund to provide extra money to the EFSF.

Mr Regling said he would meet China’s finance ministry and central bank.

“It will be interesting to listen to them, like I listen to investors from many other parts of the world,” he said.

He said the fund’s managers want to find out how to structure investments “so that the money will actually come” from China and other investors.

Mr Regling said the meetings were not negotiations with potential investors, but “regular consultations at an early phase”.

Asked about suggestions that China might impose political conditions on a contribution, Regling said Chinese officials had not raised that issue with him. Some European and Chinese commentators have suggested Beijing might press Europe for trade concessions or to refrain from human rights criticisms.

“I have not been confronted with this,” Mr Regling said. “I am not talking on behalf of the European Union, so I am the wrong person” to discuss such issues.

Chinese leaders have expressed sympathy and promised to support the European Union, their country’s biggest export market. But they have made no specific public commitments of money or other aid.

Mr Regling said he would present the bailout fund’s bonds as a potential commercial investment to China once the details are worked out, and hoped that Chinese officials would find the terms attractive.

He noted that China regularly needs to find safe investments for its multibillion dollar monthly trade surpluses.

“I am optimistic we will have a longer term relationship,” he said.