China Will Be Exacting Contributor To Euro-Bailout

China’s contribution to the euro-zone’s would-be 1 trillion euro bail-out fund, the European Financial Stability Facility (EFSF), will likely be more token than substantive. The head of the fund, Klaus Regling, is in Beijing with his collecting tin, but while he will find his hosts wishing to be internationally cooperative, he will also find them risk-adverse and somewhat divided on how much China should contribute. Some would prefer to contribute through the IMF, where China could extract some political return, which will also be expected but more difficult to achieve if Beijing contributes directly to the EFSF. The are also still some burned fingers in Beijing from earlier foreign investments to diversify its foreign exchange reserves from U.S. government paper. The unresolved details of Europe’s plan gives Beijing the necessary excuse not to be rushed into committing itself to anything just yet and the time to work on some quid pro quo, probably on the trade and technology transfer fronts.

Advertisement