Beijing’s Christmas gift to Europe
By George Chen
The opinions expressed are the author’s own.
If the heavy snows engulfing London’s Heathrow Airport are the last thing Europe wants to see, then a big cheque from Beijing could be the best Christmas gift the continent — once the centre of the world, but apparently no longer — could receive this year.
The Chinese government is ready to buy 4-5 billion euros (US$5.3-6.6 billion) of Portuguese sovereign debt to help the country ward off debt market pressure, the Jornal de Negocios business daily reported on Dec. 22. Without citing any sources, the paper said a deal reached between the two governments would lead to China buying debt via auction or in the secondary market during the first quarter of 2011.
The news of Beijing seeking to invest in Portuguese bonds soon helped the euro gain ground against the U.S. dollar and bounce up from an all-time low against the Swiss franc on Wednesday. It also boosted U.S. investor confidence in bank stocks at home. The potential new credit crisis in many European nations such as Greece, Spain, Portugal, Ireland and even Italy has been a growing global concern for capital markets.
Beijing’s help could certainly ease such worries to a certain extent if the news can be officially confirmed. China’s central bank has chosen to remain silent on the report, so far.
Premier Wen Jiabao, often dubbed “Grandpa Wen” at home for his easy-going personality with ordinary people, visited a number of European countries including Portugal and Greece earlier this year. At the time, Wen’s trip was already considered a new sign of China’s growing influence in Europe, with Beijing expected to lend a hand to its national debt problems as nobody would think of turning to the United States any more for such a role in the wake of the financial crisis.
Will Portugal be the last European nation to get Beijing’s help? Unlikely. Greece is also understood to be on the waiting list to get Chinese money for its new sovereignty bond issue. However, if such aid continues, Beijing may face twin pressures from the United States and its own people.
Beijing has complained about the U.S. government’s so-called “carrot and stick diplomacy” since the days of Mao Zedong, the country’s first Communist state head, Now it’s becoming less arguable whether China will take the same approach with those so-called “friendly countries”. The United States may monitor Beijing’s financial aid for Europe closely to check for links between the money and human rights issues.
Domestically, Beijing is concerned about social stability, in particular after inflation hit repeated highs this year. Some local media reports suggested that university students in some third- and fourth-tier cities had started to protest about increasingly expensive food bills on campus. Does this remind you of anything from more recent Chinese history?
On the other side, the Chinese economy itself is far more open than when “New China” was founded by Chairman Mao in 1949, as the country still relies heavily on external trade. When we look forward to 2011, the global market environment to a very large extent is clearly linked to developments in the European debt issue. Beijing is helping Europe extricate itself from this potential new credit crisis as it also wants to avoid any negative external impact on its own economy next year.
Something pretty interesting I found out this week about China, which I also take as a good sign of Beijing’s more open-minded attitude towards the world: When China’s top banking regulator Liu Mingkang met a group of Hong Kong reporters briefly in Beijing just few days ago, Liu said “Merry Christmas” and asked the Hong Kong media types to pass on his wishes to the people of Hong Kong, the former British colony.
Liu studied in London for some years in the late 1980s, so he must know what Christmas means in the West, even though Chinese Communists should not believe in any religion. Just five or six years ago, Chinese media were still very careful about reports concerning Christmas. Even if they mentioned it in articles, it should not carry any religious overtones. Not so many years ago, a Communist official could even be sacked or demoted for speaking about Christmas or related matters in public if he was not careful enough.
Today, Liu wishes you all a merry Christmas and Beijing is actually offering the whole of Europe a Christmas surprise via its commitment to support Portugal’s debt issue. Clearly, the world has truly changed within just few decades. So, are the rules of the game now being changed by global politics and markets?
George Chen is a Reuters editor and columnist based in Hong Kong.
Photo: China’s President Hu Jintao (L) shakes hands with his Portuguese counterpart Anibal Cavaco Silva at Belem presidential palace in Lisbon November 6, 2010. REUTERS/Luis Felipe Catarino/Handout