China to remain long-term investor in Europe's debt

BUDAPEST Sat Jun 25, 2011 11:10am EDT

Chinese Premier Wen Jiabao attends a joint news conference with Hungarian Prime Minister Viktor Orban (not in picture) in Budapest June 25, 2011. REUTERS/Laszlo Balogh

Chinese Premier Wen Jiabao attends a joint news conference with Hungarian Prime Minister Viktor Orban (not in picture) in Budapest June 25, 2011.

Credit: Reuters/Laszlo Balogh

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BUDAPEST (Reuters) - Chinese Premier Wen Jiabao said on Saturday he was "still confident" that Europe can overcome the debt crisis and said China would remain a long-term investor in Europe's debt market.

The Chinese Premier spoke at a press conference with Hungarian Prime Minister Viktor Orban during a visit to Hungary.

"I have confidence in European economic development," he said. "China is a long-term investor in Europe's sovereign debt market. In recent years we have increased by a quite big margin holdings of euro bonds."

"In the future, as we have done in the past, we will support Europe and the euro," Wen added.

He said China stood willing to help Europe "work for expeditious recovery and stable growth," but did not give exact figures on how much euro zone sovereign debt China might buy.

Wen also said China was willing to buy a "certain amount" of Hungarian government bonds and aims to boost bilateral trade to $20 billion by 2015. He did not specify the amount of Hungarian bonds China would be willing to purchase either.

He said China's state development bank would provide 1 billion euros for development projects between Hungary and China.

The Chinese premier is visiting Europe as the euro zone grapples to contain Greece's worsening debt crisis and possible default which analysts fear could roil global markets and trigger another financial crisis.

China has large holdings of euro-denominated assets in its vast $3.05 trillion foreign reserves and is desperate to do what it can to preserve the value of its holdings, though analysts say the extent to which China may commit fresh funds toward purchasing distressed European debt as a market-calming gesture, will likely be limited.

Wen Jiabao, the first Chinese head of government to visit Hungary for 24 years, is also seeking to explore greater trade ties with the country given its strategic location and increasing role as a logistics and trade processing hub in Eastern Europe for Chinese goods.

Hungarian Prime Minister Viktor Orban said China's buying of Hungarian government bonds would increase the security of debt financing for Hungary in the medium term.

"The purchase of government bonds is also important for Hungary as Hungary is able to finance itself from markets but the fact that China will buy further will bring huge security," Orban said.

While Wen is expected to face a barrage of protests and criticism from governments in Britain and Germany over China's human rights record and its recent clampdown on dissent, the release of prominent activist and artist Ai Weiwei on the eve of Wen's visit could ease some pressure on this front.

The 54-year-old artist Ai was freed on bail on Wednesday, while a batch of Ai's associates and other activists have also been freed since then, marking a climbdown of sorts by Chinese authorities, who have rarely flinched in prosecuting critics of Party rule.

The 27-member EU bloc is now China's largest trading partner with bilateral trade worth nearly 400 billion euros ($573 billion).

(Writing by Krisztina Than and James Pomfret; Editing by Toby Chopra)

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Comments (4)
Krowster wrote:
The message should have been China still see Europe as buyer of its junk products.

Jun 25, 2011 8:10am EDT  --  Report as abuse
AmirDewani wrote:
Being the biggest exporter of the world, the second biggest economic power and perhaps, the biggest holder of investment portfolio in US, Europe and Africa, China is now clearly making a difference. And the difference is in making ‘trade-not-aid’ like America.
If and when the opportunity comes to buy assets in Greece, for example, China stands ready with cash which others don’t have. So, in a way, it is a planned trade activity based on ‘cash-flow’; pure and simple. Their long term planning and meticulous system of execution based on a constant vigilance mechanism makes the difference the most pronounced.Lessons must be learned from the Chinese to preserve our dollar and to manage our economic moves on the global stage i.e. deficits, debts, spending, fiscal policy making etc.

Jun 25, 2011 10:54am EDT  --  Report as abuse
emu wrote:
Uh huh.
Now I know that the euro will survive: China needs another reserve currency.
Not sure whether I’m happy about /that/ reason.
Greetings from Germany!

Jun 25, 2011 1:12pm EDT  --  Report as abuse
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