Beijing’s Christmas gift to Europe
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 large 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 help with its national debt problems as
nobody would think of turning to the United States 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 for
capital 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 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.
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 be 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.
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 set by
global politics and markets?