China helps with euro bailout to gain global status

The sums involved will help make the country be seen as one of the world's responsible big powers
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The Independent Online

China will gain political respectability while risking virtually nothing of its vast wealth if the country carries through plans to provide $50bn-$100bn to the euro $1tn bailout plan.

President Hu Jintao has discussed backing the huge increase in the European Financial Stability Facility (EFSF) with Nicolas Sarkozy, the French President, to save the eurozone from collapse. European leaders agreed the new bailout package late last week, though markets were surprised when China was immediately identified as one of the potential backers of the EFSF.

The country has since said it will look at the details of the plan before committing any money. However, it is widely believed China will want to participate in the fund as it will help establish the country as one of the world's leading powers. Vicky Pryce, of FTI Consulting, said: "Investing [in the ESFS] wouldn't give China much of a return at all; it would just give them more power."

Shaun Breslin, a China expert at Warwick University, said China "realises that a stable global economy is good for them – they can't export to people if they've got no money". He added that China was keen to be viewed as a responsible great power and that the EU's arms embargo against China makes its leaders "look like Zimbabwe, Burma and regimes like that". Experts in the field believe China would seek to get this embargo overturned through its improved political reputation, while it would also be in a stronger position to snap up assets likely to come up through privatisations across Europe.

At the same time, China can ensure that the euro acts as a powerful counterweight to the dollar, so that there is not one currency that can overwhelm the Chinese renminbi.

Dr Damian Tobin, a lecturer in Chinese business and management at the School of Oriental and African Studies, argued: "China is simply protecting the stability and access to key export markets, which has been its central concern since the financial crisis. This access is key to maintaining growth and employment, and fundamental to the legitimacy of China's [free market] reforms."

British business, which has been seeking closer ties with China, is pleased at the prospect of the country having closer ties on its doorstep. Tesco's Lucy Neville-Rolfe, also a board member of China-Britain Business Council, said: "As an investor in Europe and China, we are pleased that it looks as if China is set to play a growing part in the world trade and economic system."

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