China to make plans for Greek euro exit risk: sources

BEIJING Mon Jun 4, 2012 3:38am EDT

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BEIJING (Reuters) - The Chinese government has called on key agencies including the central bank to come up with plans to deal with the potential economic risks of a Greek withdrawal from the euro zone, three sources with knowledge of the matter told Reuters on Monday.

The sources said the plans may include measures to keep the yuan currency stable, increase checks on cross-border capital flows and stepping up policies to stabilize the domestic economy.

As investor concerns over Greece's possible exit from the euro zone grow, the central government has called on related state agencies, including the National Development and Reform Commission, the central bank and the banking regulator, to discuss contingency plans, the sources said.

"It's very urgent," a source with direct knowledge said. "The government has asked every department to analyze measures to cope with a Greek exit from the euro zone and make their own suggestions as soon as possible."

Late last month, Premier Wen Jiabao warned at a state council meeting that "downward economic pressure is increasing". The government has already announced a raft of measures to support economic growth, which is expected to slide this year to its weakest pace since 1999.

These include fast tracking infrastructure and industrial investment projects while doling out subsidies for energy-saving home appliances and cars.

A research chief with a Chinese bank in Hong Kong said that banks are being required by the mainland authorities to hand over a brief on global financial markets every day.

Yu Yongding, an influential economist and a former central bank adviser, said in comments published last week that China should prepare for a Greek withdrawal from the single currency and proposed steps including capital controls to cash injections to domestic markets to reduce volatility.

China's central bank chief said in comments published on Monday that the country will continue to invest in euro zone government debt and other assets and urged the single-currency bloc to step up reforms to stem its debt crisis.

(Reporting By China Newsroom; Editing by Neil Fullick)

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