PARIS (Reuters) – While European politicians battle over whether to issue common euro zone bonds to help resolve the currency area’s sovereign debt crisis, China could influence the outcome.
Europe is Beijing’s biggest export market and Chinese leaders have a declared interest in avoiding a financial meltdown in the European Union that could trigger a world recession.
They want to diversify their $3.2 trillion in foreign exchange reserves away from U.S. Treasury bonds and started long before Standard & Poor’s downgraded U.S. debt last month due to Washington’s political gridlock over reducing its deficit.
“European countries are facing sovereign debt problems. We’ve said countless times that China is willing to give a helping hand, and we’ll continue to invest there,” Premier Wen Jiabao told a World Economic Forum conference last week.
But he cautioned that the major developed economies should put their fiscal houses in order, and urged Europe to take a reciprocal step by recognising China as a market economy — giving Beijing better protection against EU anti-dumping action.