Prime minister Wen Jiabao says his country will support Greece and rest of euro zone to overcome financial crisis.
Aljazeera, 02 Oct 2010
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| Prime minister Wen, left, did not specify how much Greek debt China would be willing to buy [AFP] |
China has offered to buy Greek government bonds, in a show of support for the country whose debt burden pushed the euro zone into a crisis.
Wen Jiabao, the Chinese prime minister, made the offer on Saturday at the start of a two-day visit to Greece, his first stop on a tour of Europe.
During talks with George Papandreou, the Greek prime minister, Wen said China would double its trade ties with Greece over the next five years, underscoring Beijing's use of economic strength to win friends.
"China will undertake a great effort to support euro zone countries and Greece to overcome the crisis," Wen said.
In addition to seeing economic opportunities in Greece, China's support of a struggling European country may also help deflect international criticism of its trade policies and its refusal to let its yuan currency appreciate sharply.
Wen did not specify how much Greek debt China would be willing to buy or which Chinese entities would buy the bonds.
Chinese state entities have been generally conservative about investing in foreign financial markets and the Chinese government faces domestic political criticism over losses incurred by these entities during the global financial crisis.
China has a lot to gain from getting a foothold into Europe, said Vagelis Agapitos, an economist in Athens specialising in investment.
"They [China] get a bargain in terms of buying into strategic industries, such as the port authorities, the railways and the logistic centre, which is important for the export of Chinese goods," Agapitos told Al Jazeera.
High borrowing cost
A senior Greek government official said Wen made clear his offer concerned buying bonds only when the country returned to markets.
Greece, which is currently funded through a 110 billion euro ($150 billion) EU/IMF bailout, is only issuing short-term treasury bills for the time being.
Since the true scale of its debt burden emerged late last year, investors have shunned its bonds.
The yield they demand to hold 10-year Greek debt has shot up to 10 per cent, compared with just 2.3 per cent for similar bonds from the euro zone's biggest economy Germany, making it too expensive for Greece to seek long-term funding in international markets.
It has said it wants to return to markets some time next year to sell longer-term debt.
"There is domestic pressure [in Greece] not to sell itself cheaply, but there is also quite significant international pressure regarding the total debt, which is at 120 per cent of the GDP, and rising," Agapitos said.
"This needs to go down in order to avoid debt restructuring which would be disastrous, not only for Greece but also for the European Union as a whole," he said.
China, at loggerheads with the US over the yuan and likely to face similar complaints during this European tour, emphasised its willingness to co-operate with the 27-nation EU on financial issues.
"China is prepared, hand in hand with the EU, as passengers in the same boat, to strengthen co-operation ... to confront the financial crisis," Wen said.
"I believe that we can undertake a genuine effort to promote the reform of the international financial system and strengthen its supervision," he said.
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| Brian Lenihan, Ireland's finance minister, attempted to calm market fears over the effect the cost of the bail-out would have on the country. Photo: PA The investors are attempting to force the Irish authorities to pay them more for the debt they hold in Anglo Irish Bank and say if their demands are not met they could trigger a default crisis. |
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