China pledges support to the euro

Friday, February 17, 2012

China's top central banker this week expressed confidence in the euro and pledged to continue buying European sovereign debt, as the Asian giant seeks to shore up support for its biggest trading partner.

President Hu Jintao also gave his vote of confidence in talks with visiting EU leaders, saying China supported measures taken to counter the eurozone debt crisis and reiterating Beijing's readiness to help solve the issue.

"China will... continue to invest in European government bonds and will continue... to get more involved in solving the European debt crisis," central bank governor Zhou Xiaochuan said.

"We have confidence in the euro," he added, during a speech at the opening of a euro exhibition in Beijing also attended by European Union president Herman Van Rompuy and European Commission president Jose Manuel Barroso.

Premier Wen Jiabao told the European leaders on Tuesday that Beijing was ready to increase its participation in efforts to help address the crisis, and was considering using Europe's bail-out funds, without elaborating further.

On Wednesday, Hu reiterated China's readiness to help out.

"China closely watches and supports the series of measures being taken by the European Union, International Monetary Fund and European Central Bank to counter Europe's debt problems," he told Van Rompuy and Barroso in a meeting.

"China... will participate in the international community's actions to support Europe and the eurozone," he added, in comments published on the foreign ministry website.

China has made clear its growing concerns over Europe -- its biggest export market -- and has repeatedly urged EU leaders to get a grip on the situation, which the foreign ministry said this week had reached a "critical juncture".

Barroso said Europe was "putting our house in order" but noted it was a long process.

"This is a marathon not a sprint," he said Wednesday.

Van Rompuy, meanwhile, said that European leaders "highly value" China's confidence in the region and vowed to do everything necessary to "maintain the euro and the financial stability of the eurozone".

Leaders of the 17-nation eurozone and eight other EU nations agreed last month to create a new fiscal pact requiring signatories to put balanced budgets into law.

But Moody's this week questioned whether Europe was pulling together adequate resources to deal with the crisis as it downgraded Italy, Spain and Portugal.

The ratings agency also put France, Britain and Austria on warning, saying they were increasingly vulnerable to the eurozone crisis.

China holds the world's largest foreign exchange reserves, and European leaders have been keen that it invest in a bail-out fund to rescue debt-stricken states.

Zhou said Wednesday that the Asian powerhouse had not reduced the proportion of its investments in euro-denominated assets during the crisis.

"We believe that so long as all the European nations can solidify themselves together they will have the ability to solve the problems they face," Zhou said.