UK looks east as eurozone absorbs more rating shocks

George Osborne woos China and Japan while nine EU members downplay credit downgrades

George Osborne today takes advantage of the deepening eurozone crisis by appealing to China to make Britain the "home of Asian investment" in the West.

As France and other eurozone nations reeled from their credit rating downgrades on Friday, the Chancellor embarked on a three-day visit to China and Japan designed to pitch Britain as a strong partner to Asia's rampant economies.

Mr Osborne's visit came as Germany's Chancellor, Angela Merkel, and senior EU politicians played down fears that France's loss of its AAA rating would hit the eurozone bailout fund.

In a speech at the Asia Financial Forum in Hong Kong tomorrow, Mr Osborne will say: "I believe we can make Britain the home of Asian investment and Asian finance in the West."

The Chancellor will meet political and business leaders in Beijing and Tokyo as he drums up British trade in a year when the UK is at the centre of the world's attention for the Queen's Diamond Jubilee and the London Olympics.

Treasury sources said the visit was designed to look beyond the economic uncertainty on the doorstep in Europe to the opportunities for growth from Asia.

Mr Osborne will tell his Hong Kong audience: "Over the last three months, I have spent a lot of time in talks about the eurozone. The problem of high indebtedness in Western economies means these are challenging times for the world economy. But as we look to this difficult year ahead, I want to focus on reasons to be optimistic for the future.

"A richer, stronger Asia is an opportunity for the world, not a threat. The strength of Asian economies means world growth in this decade and the next will be higher than the past 30 years."

Mr Osborne is expected to announce in Beijing two new research partnerships into stem cells and smart electricity grids, among other investment links.

While eurozone trade is weaker than expected, British exports to emerging economies are faring better. Exports to the BRIC countries of Brazil, Russia, India and China increased by 2.3 per cent in the second and third quarters last year.

On Friday night, Standard & Poor's (S&P), one of the big three credit ratings agencies, downgraded France and eight other eurozone members, including Austria, Italy, Spain and Portugal. The downgrade increases their borrowing costs, as the lower the rating the more it is perceived that there is the possibility of default on debts. Some investors will buy bonds only from countries with the fail-safe top AAA rating.

Last night, Treasury sources insisted there would be no "Schadenfreude" at France's loss of its cherished rating, despite senior French politicians last month questioning why Britain had not been downgraded.

But the fear is that S&P's decision could lead to a downgrade of the European Financial Stability Facility (EFSF), the temporary crisis fund guaranteed by eurozone countries. The facility is currently AAA-rated, making it easier to raise money on the bond markets. However, with significant guarantors no longer holding the top rating, there is speculation that the EFSF will either have to cut the amount it can lend to stricken economies or accept its own downgrade.

Mrs Merkel, speaking at an event held by her Christian Democratic Union party yesterday, vowed: "The interest rates for the acceptance of certain bonds had already risen a bit anyway – the work of the EFSF will not be torpedoed. I see no need to change anything regarding the EFSF."

She added that S&P's decision meant that a permanent bailout fund to succeed the EFSF must be set up as soon as possible. Ms Merkel also said the eurozone's fiscal rules must be tightened as soon as possible.

Sharon Bowles, the British Liberal Democrat MEP who chairs the European Parliament's powerful Committee on Economic and Monetary Affairs, told The IoS that a slight downgrade could increase the strength of the EFSF. Investors seeking higher interest rates as a reward for taking slightly greater risks by putting their money outside of the top-rated bonds would be attracted to the EFSF, she argued.

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksNow available in paperback
Life and Style
Passing on: George Washington died alert, aware and in his own bed. This is the kind of of death most people would like to have
health
Life and Style
fashion

News
Jeremy Paxman has admitted he is a 'one-nation Tory' and complained that Newsnight is made by idealistic '13-year-olds' who foolishly think they can 'change the world'.
peopleFormer Newsnight presenter is being touted for a brand new role
Arts and Entertainment
Stella Gibson is getting closer to catching her killer
tv
News
Brazilian football legend Pele pictured in 2011
peopleFans had feared the worst when it was announced the Brazil legand was in a 'special care' unit
News
i100(More than you think)
Sport
Brendan Rodgers seems more stressed than ever before as Liverpool manager
FOOTBALLI like Brendan Rodgers as a manager, writes Paul Scholes
News
The Magna Carta
archaeologyContemporary account of historic signing discovered
Extras
indybest

Arts and Entertainment
Stik on the crane as he completed the mural
art
Arts and Entertainment
Phyllis Dorothy James on stage during a reading of her book 'Death Comes to Pemberley' last year
peopleJohn Walsh pays tribute to PD James, who died today
Sport
Benjamin Stambouli celebrates his goal for Tottenham last night
FOOTBALL
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Production Planning MRP Manager

Negotiable: Recruitment Genius: One of the UK's most progressive and innovativ...

Recruitment Genius: Financial Sales Executives

£19000 - £24000 per annum: Recruitment Genius: Due to our clients continuing s...

Recruitment Genius: Tyre Technician / Mechanic

£15000 - £16800 per annum: Recruitment Genius: A Tyre Technician / Mechanic is...

h2 Recruit Ltd: Internal Sales - Technical Solutions - £26,000 Basic

£26000 per annum: h2 Recruit Ltd: London, Reading , Southend, Aldershot, Luto...

Day In a Page

Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

Christmas Appeal

Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

Is it always right to try to prolong life?

Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

What does it take for women to get to the top?

Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

Knitting pretty: British Christmas Jumpers

Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

French chefs campaign against bullying

A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

Just what you need on a New Year hangover...

Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
Cuba set to stage its first US musical in 50 years

Cuba to stage first US musical in 50 years

Claire Allfree finds out if the new production of Rent will hit the right note in Havana
Christmas 2014: 10 best educational toys

Learn and play: 10 best educational toys

Of course you want them to have fun, but even better if they can learn at the same time
Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

Paul Scholes column

I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

Lewis Moody: Lancaster has made all the right calls – now England must deliver

So what must the red-rose do differently? They have to take the points on offer 
Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game