“China has actually increased the purchase of government bonds of some European countries, and we haven’t cut back on our euro holdings,” Wen told the British Broadcasting Corp. yesterday in an interview. These acts “show our confidence in the economies of Europe and the euro-zone.”
Wen, whose country’s $3 trillion of currency reserves are the world’s largest, is today due to meet with U.K. Prime Minister David Cameron in London as European policy makers enter another week of talks on how Greece can avoid default. Greek lawmakers vote this week on an austerity package needed to secure more international aid, while governments elsewhere on the continent are negotiating with banks over how they can assist the country.
China’s leader is visiting Europe as investors signal renewed concern in the ability of euro-region nations to beat the debt crisis that has occupied the minds of officials for more than a year. European stocks fell for an eighth week last week, the longest stretch of losses since 1998, and the euro weakened to a record against the Swiss franc amid speculation Greece won’t be able to pay its bills.
“China is ready to work with Europe to share opportunities, cope with challenges and achieve common development, and to make unremitting efforts for stable development of the world economy and an in-depth development of China-Europe ties,” China’s state-run Xinhua news agency cited Wen as saying June 25.
This is not the first time Wen has expressed support for Europe’s cash-strapped nations. He said in April that China would invest in Spain’s bonds and savings bank industry and that it would continue buying public debt.
Wen’s visit will help “convince the market that China will provide a contagion back-stop” and so lend support to the euro, Douglas Borthwick, head of foreign-exchange trading at Stamford, Connecticut-based Faros Trading, said in a June 20 report.
China is playing a “white knight” role in assisting Europe and buying itself goodwill that will enable it to purchase more sensitive European assets such as technology companies, according to Faros Trading. The Asian country’s purchases of euro-denominated debt also helps diversify its reserves away from dollars, it said.
Wen’s positive comments contrast with last week’s criticism of Europe’s strategy by other international policy makers. U.S. Treasury Secretary Timothy F. Geithner said that the region must speak with a “clearer, more unified voice,” while Bank of England Governor Mervyn King said Europe must realize it is dealing with an issue of solvency not liquidity.
Today’s talks in London will be focused on trade as the U.K. government seeks to boost commerce with China to $100 billion by 2015, Cameron’s office said in a statement. Downing Street also said the two countries are set to make it easier for British businesses to branch out beyond Beijing and Shanghai and that China will again open its market to U.K. poultry exports.
During Wen’s last visit to the U.K. in 2009, a protester denounced him as a “dictator” and threw a shoe at the premier as he was giving a speech at Cambridge University. In the run-up to Wen’s visit, the government released dissidents in a move that may have been aimed at defusing potential criticism.
Hu Jia, a campaigner for AIDS sufferers, environmental issues and civil rights, was released yesterday after spending more than three years in a Beijing prison, his wife said. Hu’s release was expected as his prison term was set to end today.
Chinese authorities released dissident artist Ai Weiwei on bail on June 22, Xinhua said that day. Ai, who was detained on April 3 at Beijing airport, was let out because of “his good attitude in confessing his crimes,” willingness to pay taxes he owes, and his chronic disease, Xinhua said.
Human Rights Watch, a New York-based advocacy group, says Ai was one of more than 100 people detained in China this year in “the largest crackdown on dissent in over a decade.”
Wen, who visited William Shakespeare’s hometown of Stratford-Upon-Avon and toured a Chinese-owned car factory yesterday, will also deliver a speech before traveling to Germany. In Budapest, he promised to buy a “certain amount” of Hungarian bonds and to extend a 1 billion-euro ($1.4 billion) loan via China’s state development bank to finance projects in Hungary.