Govt waits for clarity on EU bailout fund

Updated: 2011-10-29 09:10

By Chen Jia and Zheng Yangpeng (China Daily)

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BEIJING - Senior Chinese officials said on Friday that the country would not inject more capital into the EU's bailout fund before more rescue details have emerged.

However, the country will keep an open mind toward all discussions on further investment into the European Financial Stability Facility, said Zhu Guangyao, Chinese vice-finance minister, at a news conference in Beijing on Friday.

"China has already invested in the fund, and additional contributions are still under discussion," said Zhu.

"It will take more time to carry out studies before making an investment decision," he added.

Klaus Regling, chief executive of the fund, visited Beijing on Friday to meet officials with the Ministry of Finance and the central bank, just one day after the outcome of the Eurozone rescue plan.

"The country has particular needs to invest in foreign bonds every month because of its currency account surplus, and the fund will continually offer good products for China," Regling said on Friday.

He expressed his hope for building a long-term relationship with China, which holds the world's largest foreign-exchange reserves, but declined to give details of any potential Chinese investment in the bailout fund.

China, which has $3.2 trillion in foreign exchange reserves, was "interested in finding attractive, solid, safe investment opportunities", he said.

Zhu said that no specific plan about increasing investment in the rescue fund was discussed with Regling. In addition, G20 member countries will not talk about any plan to purchase the fund's bonds when they meet next week in Cannes, France, Zhu said.

Chairman of the China Banking Regulatory Commission, Liu Mingkang, also said on Friday that the nation has not considered specific measures allowing Chinese banks to invest in the fund to help stem the region's debt crisis.

"China's economy is slowing and they may well want a war chest to support their own economy," Julian Jessop, chief global economist at London research house Capital Economics, was quoted as saying by AFP.

According to Regling, the EU rescue fund may explore setting up a special purpose instrument with the International Monetary Fund to channel money from member countries.

European leaders struck an agreement on Thursday to rescue Greece from the ongoing crisis by writing down 50 percent of its debt and expanding the Eurozone's bailout fund to 1 trillion euros ($1.4 trillion) from 440 billion euros.

The fund is designing new investment instruments for global participants in order to expand and diversify portfolios.

Many analysts said it may be a good chance for China to win goodwill, which could lead to payoffs by helping Europe. Recognizing the country as a "market economy" and reducing Sino-EU trade frictions were seen by global media as China's bargaining chips.

The head of the Eurozone's bailout fund said that there was no plan to discuss any concessions with the Chinese authorities during this trip.

Ding Yifan, deputy director of the World Development Research Institute at the Development Research Center of the State Council, said on Friday that China should think better of whether to participate in the rescue of the Eurozone's debt.

"Helping the EU could be an opportunity to improve China's influence in the international financial system. But it doesn't mean that Beijing is anxious to ask for instant benefits and extra advantages," said Ding.

"The premise for China to help EU countries is to make sure that the foreign-exchange holdings are safe," said Peng Wensheng, chief economist with China International Capital Corp.

He said that the country could ask for help from the IMF and other multilateral agencies to improve the investment regulations.

China also suggested encouraging more private capital to invest in the Eurozone, Peng said.

Yang Ning and Chen Keyu contributed to this story.

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