China says ‘con­crete ac­tion’ taken on EU debt

The Pak Banker - - Company & Boss News -

BEI­JING: China backs the Euro­pean Union's ef­forts to en­sure fi­nan­cial sta­bil­ity, Vice Premier Wang Qis­han said on Tues­day, spurring a rally in the euro. China sup­ports the In­ter­na­tional Mon­e­tary Fund's mea­sures and "has taken con­crete ac­tion to help some EU mem­bers counter the sov­er­eign-debt cri­sis," Wang said at the start of the Third EU-China High-Level Eco­nomic & Trade Di­a­logue, a one-day fo­rum in Bei­jing to dis­cuss eco­nomic and trade re­la­tions.

The euro ad­vanced against 14 of its 16 most-traded coun­ter­parts on spec­u­la­tion in­vest­ments by China, which holds a record $2.65 tril­lion in for­eignex­change re­serves, will ease Europe's fis­cal cri­sis and boost the al­lure of the re­gion's as­sets. Chi­nese Premier Wen Ji­abao said in Oc­to­ber that China sup­ports a sta­ble euro and won't re­duce Euro­pean bond hold­ings. "EU mem­bers have taken a num­ber of steps to ac­tively re­spond to the sov­er­eign-debt cri­sis," Wang said. "We hope these mea­sures will quickly pro­duce re­sults and lead to a steady re­cov­ery of the EU economies."

The euro yes­ter­day fell to the low­est in two weeks against the dol­lar and yen on spec­u­la­tion some Euro­pean na­tions will strug­gle to raise funds amid a slew of credit-rat­ing and out­look changes. Greece and Ire­land were res­cued by their neigh­bors and the IMF this year, and in­vestors now are con­cen­trat­ing their sights on Por­tu­gal as economies through­out the con­ti­nent slash bud­gets to ap­pease in­vestors concerned by fis­cal ex­cess.

"The com­ments would be a good Christ­mas present for the euro if Asian sup­port for the EU con­tin­ues into next year," said Kurt Mag­nus, ex­ec­u­tive di­rec­tor of for­eign-ex­change sales at No­mura Hold­ings Inc. in Syd­ney. "There's a lot of peo­ple look­ing to sell euro and go into 2011 with a core short po­si­tion and there's no way that you would be short euro," if China con­tin­ued to sup­port the re­gion, he said.

Moody's In­vestors Ser­vice last week cut Ire­land's debt rat­ing by five lev­els and put Greece on re­view for a pos­si­ble "multi-notch" down­grade. It said Dec. 15 it may lower Spain's cred­it­wor­thi­ness. Stan­dard & Poor's is re­view­ing its as­sess­ments of Ire­land, Por­tu­gal and Greece.

China's econ­omy faces "un­cer­tain­ties" next year, and be­cause of that the coun­try is pay­ing "great at­ten­tion" to whether the EU's sovereign­debt cri­sis can be con­trolled, "es­pe­cially in the first quar­ter of next year, what will hap­pen," Com­merce Min­is­ter Chen Dem­ing said at a press brief­ing at to­day's meet­ing.

Pol­icy mak­ers in the world's fastest-grow­ing ma­jor econ­omy will see if the EU can im­prove on pre­ven­tion of risks and "trans­late their con­sen­suses into prac­tice for them to step out of the cri­sis as soon as pos­si­ble," Chen said.

The Por­tuguese govern­ment said last week that China had made a "clear state­ment" of fi­nan­cial sup­port dur­ing Fi­nance Min­is­ter Fer­nando Teix­eira dos Santos's visit to Bei­jing.

China is will­ing to in­vest 4 bil­lion eu­ros ($5.3 bil­lion) to 5 bil­lion eu­ros in Por­tuguese govern­ment debt in the first quar­ter of next year, Lis­bon­based news­pa­per Jor­nal de Ne­go­cios re­ported on Dec. 16, with­out say­ing where it got the in­for­ma­tion.

It wasn't clear if China would ac­quire debt on the sec­ondary mar­ket, in govern­ment bond auc­tions or in a di­rect trans­ac­tion with the Por­tuguese trea­sury, the news­pa­per said. China's pur­chases would cover about a third of Por­tu­gal's re­fi­nanc­ing needs through April, Jor­nal said. -PB News

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