UPDATE 1-Chinese official: Euro zone help in China's interests - FT

Thu Oct 27, 2011 3:24pm EDT

LONDON Oct 27 (Reuters) - Helping the euro zone to overcome its sovereign debt crisis is in China's economic interests, but the country must be careful not to squander its reserves, Li Daokui, an adviser to China's central bank, told the Financial Times newspaper on Thursday.

Chinese support for a bailout for Europe's indebted nations would depend on contributions from other countries, the newspaper paraphrased Li as saying.

Beijing would also demand strong guarantees on the safety of its investment, Li added, according to the report.

"It is in China's long-term and intrinsic interest to help Europe because they are our biggest trading partner but the chief concern of the Chinese government is how to explain this decision to our own people," Li was quoted as saying on the newspaper's website.

"The last thing China wants is to throw away the country's wealth and be seen as just a source of dumb money."

The Chinese government might also ask European leaders to avoid criticising China's currency policy, the newspaper said in indirect speech attributed to Li. Critics have repeatedly accused Beijing of deliberately undervaluing its currency to help its exporters.

A former member of China's central bank monetary policy committee told the Financial Times that European countries must show that they have the political will and the support of voters to push through reforms.

"If we see protests and chaos all the time, then China won't have confidence in Europe's political ability," Yu Yongding was quoted as saying.

China earlier welcomed the consensus reached at a European summit to tackle the euro zone debt crisis and supported measures taken by the bloc that could help the region's recovery.

Euro zone leaders face pressure to finalise the details of their plan to slash Greece's debt burden and strengthen their rescue fund.

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