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Chinese motives for euro-zone help


economy

Chinese motives for euro-zone help

For insight into China’s moves to support the euro zone, euronews spoke to its expert in Beijing, Robert Lawrence Kuhn.

Seamus Kearney, euronews: Is China likely to become a significant cash cow for Europe?

Robert Lawrence Kuhn: Well don’t tell all of these people (the Chinese public) that; they will be very angry. They feel that they and their fellow countrymen worked for three decades very hard, many of them in sweat shops, and for the leaders to squander their money on bad debt would make them very angry. But in all seriousness, China’s leaders take what is happening in Europe very seriously, for several reasons.

First of all, China’s economy is very fragile and the entire world is dependent upon Europe, we see. So China knows that the entire economy of the world depends on Europe and so China is affected by that.

Secondly, China knows that Europe is one of its most important markets and exports are still a giant part of China’s economy, so it’s essential.

And third, China looks upon the world as a multi-polar world, and so a strong Europe is needed to balance out the US and Russia, and China wants to participate. So for all of these reasons, Europe is exceedingly important to China and I think that’s good for the world.

euronews: But are we talking about a huge contribution? What kind of money is going to be put forward by the Chinese?

Kuhn: Well, first of all, China is going to be very circumspect in terms of what it does. It’s not going to be investing very quickly in sovereign debt of any individual country and it will want to work with other countries in the G20 and particularly in the IMF so that there is an international approach that China will be a participant in, and they will want to send a signal to the world that China will support Europe.

China’s not going to do this without expecting something in return. That is not necessarily a quid pro quo, because Europe by itself is important to protect, but in appreciation for what China has become.

This will mean greater participation in the IMF, in terms of voting rights; it will mean recognition of China as a market economy, which has been very controversial as we know; and it will also mean opening up the European markets to additional Chinese investment, and more opportunities.

China feels, to some degree, in some areas, that they are excluded, just like we in the West feel that the China market is often unfavourable to foreign companies.

euronews: With those worries and concerns, do the Chinese people have enough of a voice when these kinds of decisions… this kind of help is being given?

Kuhn: Well, you know the approach today is a very interesting one because the people have a very strong voice; it’s not a voting voice, it’s not a direct political voice, but there is something about Chinese society today in terms of the Internet, in terms of cellphones. There are 900 million cellphones; nothing happens here without somebody taking a picture and putting it up on websites. And there’s a great sense of nationalism, and a sense that they don’t want their leaders doing things that are going to hurt China and hurt the hard work that people have done here and so they are watching closely.

euronews: We know that Europe has been criticised in the past for not having a back-up plan, a plan B in times of crisis… Do you think the Chinese have a back-up plan? Are they cunning enough to make sure that they come out of all of this in one piece?

Kuhn: You know, it’s very difficult. They have several levels of plan. They’re very anxious. They (brought) in the stimulus package, which they did at the end of 2008; they did that very quickly, faster than any other nation, and as a percentage of GDP it was the highest in the world because they were very concerned about tens of millions of people being put out of work and then start marching in the streets.

So they’re very concerned about that and you know, at the end of the day, China has a significant internal police and paramilitary force, to prevent chaos in the country, you know, that would be used because that would be the lesser evil if economic devastation occurs, but nobody expects that.

Everybody recognises there are problems, but (also)that China can become more self-reliant, and that’s what they’re trying to do. They’re trying to build up domestic consumption in China so they’re not dependent so much upon exports and therefore at the mercy of what happens in Europe.

So, if we fast-forward 10 years or so and the Chinese economy becomes more robust from a domestic consumption point of view, China may be less likely to bail out Europe in the future. So this may be the last best chance for Europe to put its house in order with Chinese support.

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