China is op­posed to ‘Grexit’ from the EU

China Daily (Canada) - - FRONT PAGE - By CHEN JIA in Bei­jing chen­jia1@chi­

China wants to see Greece re­main in the eu­ro­zone, and there are ways to tackle the coun­try’s debt cri­sis through the ef­forts of the in­ter­na­tional com­mu­nity, China’s For­eign Min­istry and ex­perts said.

“We hope to see that the EU and eu­ro­zone can ap­pro­pri­ately re­solve this is­sue and Greece can re­main in the eu­ro­zone. This com­plies with the in­ter­ests of all sides,” For­eign Min­istry spokes­woman Hua Chun­y­ing said on Wed­nes­day.

Ex­perts said the missed pay­ment may lead to a down­grade of Greece’s sov­er­eign debt rat­ing and spark more debt de­faults.

“China will con­tinue to play a con­struc­tive role in this re­gard.”

Greece’s fail­ure to make a sched­uled debt re­pay­ment to the In­ter­na­tional Mon­e­tary Fund on Tues­day was the first de­fault by an ad­vanced econ­omy in the fund’s history.

“China’s di­rect lend­ing to Greece, in terms of sov­er­eign debt pur­chases un­der the bi­lat­eral loan agree­ment, is very lim­ited. It ac­counts for a small part of all Greek bor­row­ing,” said He Maochun, di­rec­tor of the Econ­omy and Diplo­macy Re­search Cen­ter of Ts­inghua Univer­sity. The Chi­nese gov­ern­ment has not re­leased in­for­ma­tion about its to­tal lend­ing to Greece.

Some ex­perts say the missed pay­ment has dragged Greece into a dan­ger­ous place as it may be forced to exit the eu­ro­zone, a pos­si­bil­ity known as the ‘Grexit’, if Greeks vote “no” on a bailout plan on Sun­day.

“As a re­spon­si­ble, long-term holder of Eurobonds and a ma­jor trade part­ner of the EU, China would not like to see Greece leave the eu­ro­zone, ” He said. “China will con­tinue to talk with EU lead­ers to find bet­ter ways of solv­ing the prob­lem.”

Greece, on the Mediter­ranean coast, is on the route of China’s pro­posed New Silk Road Eco­nomic Belt and 21st Cen­tury Mar­itime Silk Road.

“It is an im­por­tant coun­try be­cause it con­nects China with Europe through land and the mar­itime routes. Highways, rail­ways, ports and coastal in­fra­struc­ture in Greece are ma­jor projects for in­vest­ment co­op­er­a­tion be­tween the coun­tries,” said He.

Chen Xin, di­rec­tor at the Eco­nom­ics Depart­ment un­der the In­sti­tute of Euro­pean Stud­ies of the Chi­nese Academy of So­cial Sciences, said if the Greek debt cri­sis con­tin­ues to es­ca­late, it might de­rail the global eco­nomic re­cov­ery and dam­age the long-term vi­a­bil­ity of the euro as a cur­rency.

“It is pos­si­ble that the Greek gov­ern­ment will take se­ri­ous con­trol of cap­i­tal flows if the coun­try ex­its the eu­ro­zone, and our com­pa­nies will not be able to freely ex­change cap­i­tal back to China, which would mean their in­vested projects might face big losses.”

Chen sug­gested Chi­nese com­pa­nies re-eval­u­ate in­vest­ment risks in Greece.

“The Chi­nese gov­ern­ment may sup­port the coun­try by in­ject­ing more cap­i­tal into the IMF bailout fund, but it is a more com­pli­cated po­lit­i­cal is­sue and full of un­cer­tain­ties,” he added.

Ac­cord­ing to the Min­istry of Com­merce, Sino-Greek bi­lat­eral trade vol­ume was $4.53 bil­lion in 2014, an in­crease of 24 per­cent year-on-year. China’s di­rect in­vest­ment in Greece was around $1.3 bil­lion last year.

“The Greek debt is­sue is cru­cial for Europe, and its im­pli­ca­tions for China are also im­por­tant, given it is a very large mar­ket for China,” Ay­han Kose, di­rec­tor of the Prospects De­vel­op­ment of the World Bank Group, said on Wed­nes­day in Bei­jing.

The World Bank’s up­dated forecast for eu­ro­zone GDP growth is 1.5 per­cent this year and 1.8 per­cent in 2016, de­spite the Greek cri­sis.

“We are very pleased to see that the eu­ro­zone re­cov­ery is speed­ing up, as the quan­ti­ta­tive eas­ing pol­icy is work­ing and de­fla­tion risk is di­min­ish­ing,” said Kose.

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