China’s message to the Eurozone: don’t count on us. From the WSJ:
“We can’t just go save someone,” said Gao Xiqing, president of China Investment Corp., China’s huge sovereign wealth fund. “We’re not saviors. We have to save ourselves,” he said at a weekend [IMF] panel discussion.If Europe decided to issue euro-zone bonds—debt guaranteed by all euro-zone members—CIC would consider becoming a purchaser, he said afterwards. “If it has a risk profile that fits into our allocation, we’ll buy some,” Mr. Gao said. “But don’t expect us to buy more than our risk appetite would take.”
In reality a European meltdown would most likely create a serious economic crisis in China. Directly, because Europe is an important market for Chinese goods, and indirectly because a European crash would almost certainly throw the US back into recession — giving Chinese exports another hit. On the other hand, if thrifty Germans object to bailing out lazy Greeks, ordinary Chinese would be even more furious to find that their hard earned reserves were going to subsidize the lifestyles of affluent Europeans.There are no magic solutions to the problems facing Europe, no bags of Chinese gold, no clever central banking tricks. The next few weeks and months will show once and for all how committed Europeans are to the project of union which has absorbed so much of their political attention over the last sixty years. Americans should not underestimate the depth of Europe’s determination to make the union, and the euro, stick — but if the EU as we’ve known it survives this crisis, it will be a very close run thing.