China’s position on bailing out the eurozone is as ambivalent as, well, Germany’s. That is one way of reading last week’s meeting between Prime Minister Wen Jiabao and Chancellor Angela Merkel. Mr Wen said Beijing was “investigating and evaluating ways in which it can get more deeply involved in solving the European debt problem”. That line could have been scripted in Berlin, so accurately does it sum up Germany’s position. Translation: sure we are interested in helping the eurozone, but on our terms.
European leaders fret too much about whether, or how, China and other Asian nations and sovereign wealth funds might come to the eurozone’s aid. They have already made big contributions. In 2011, Asia-based investors bought roughly 20 per cent of the €16bn of bonds issued by the European Financial Stability Facility. Governments, central banks and sovereigns – the bulk of them probably Asian – subscribed for between 32 per cent and 54 per cent.
True, the proportion of both fell sharply in the EFSF’s latest foray into the market, when it issued €3bn of three-year bonds last month to fund Ireland and Portugal. Asian investors bought 12 per cent of the issue, which coincided with the furore over France’s loss of its triple A rating. (One pattern to emerge from Asian buying is that they prefer five-year bonds.) But the slide in the EFSF’s creditworthiness may shape future demand, so the eurozone must keep helping itself. The most salient fact about the last EFSF bond issue is that 76 per cent of it was bought by eurozone-based investors.