China vows to help euro zone nations out of predicament

BEIJING // The Chinese premier yesterday said his country would do more to help the euro zone dig itself out of its sovereign debt crisis, but following talks with European Union leaders he made no public commitments to offer bailout funds.

Wen Jiabao said China would "increase its participation in resolving the EU debt problems" after meeting the European Council president, Herman Van Rompuy, and the European Commission president, José Manuel Barroso, in Beijing.

Mr Wen did not promise Beijing would invest any of its US$410 billion (Dh1.47 trillion) sovereign wealth fund in a planned €500bn (Dh2.42 trillion) euro-zone bailout fund.

He had indicated this month that China might offer bailout funds or provide assistance through the International Monetary Fund (IMF), and analysts speculated a commitment to do this might be made at the summit.

Mr Van Rompuy told journalists that China and the EU had "agreed to cooperate" on matters linked to the deepening euro-zone crisis.

"It is up to China to make its own decision in order to contribute to the stability of the euro zone," he said.

Portugal, Spain and Italy have been downgraded in recent days by the credit ratings agency Moody's, and there have been warnings the same could happen to Austria, France and the United Kingdom, which is not in the euro zone.

Riots over austerity measures have rocked heavily indebted Greece. In Athens, dozens of buildings were burnt over the weekend amid anger over spending cuts. Late on Sunday, legislators there approved a budget aimed at cutting spending to avoid bankruptcy and allow a second bailout. More than 170 people were hurt in Athens, where clean-up operations continued yesterday, while other cities in Greece also saw turbulence.

Given the level of China-Europe trade, about €560bn last year, the euro-zone crisis has the potential to significantly affect China's economy, with the IMF warning it could cut Chinese economic growth in half.

Donna Kwok, an economist focusing on China for HSBC bank, said a collapse in western demand for Chinese goods was one of the two biggest threats facing the Chinese economy this year, the other being a possible collapse in the domestic housing market.

"If financial market turbulence associated with the sovereign debt crisis does not abate by mid-year, any spillover effect upon economies in the US and elsewhere in Asia would weigh heavily on [Chinese] mainland growth," she said.

Also yesterday, Mr Wen hit back at criticism of China's recent veto along with Russia of a UN Security Council resolution aimed at stemming the repression of dissent by the Syrian government.

"China is absolutely not protecting any party, including the government of Syria. The future of Syria is for the Syrian people to decide," he said.

Mr Van Rompuy said the EU supported Arab League efforts to stem the violence and, in a veiled plea to China and Russia, called on UN Security Council members to "act responsibly".

As the United States and EU continue to try to pressure Iran over its nuclear programme by enforcing an embargo on oil sales, Mr Van Rompuy said he told Mr Wen of Europe's "deep concern" and insisted sanctions were aimed at bringing Tehran back to the negotiating table.

The euro-zone crisis was likely to remain a talking point as the China-EU summit continues today when Mr Van Rompuy and Mr Barroso meet the Chinese president, Hu Jintao.

Yesterday's discussions in Beijing came as the Chinese vice president, Xi Jinping, was due to hold talks in Washington with the US president, Barack Obama.

Mr Xi, expected to take over as communist party chief this year and president in early 2013, will also visit Iowa and Los Angeles before travelling to the Republic of Ireland and Turkey.

dbardsley@thenational.ae