China Says May Get More Involved in EU Rescue Funds

Published: Thursday, 2 Feb 2012 

China is considering increasing its participation in the rescue funds aimed at resolving the European debt crisis, Chinese Premier Wen Jiabao told journalists on Thursday.

Attila Kisbenedek | AFP | Getty Images Chinese Premier Wen Jiabao

But Wen did not made any explicit financial commitments for the European Financial Stability Facility (EFSF) or the upcoming European Stability Mechanism (ESM).

At a joint media briefing in Beijing with visiting German Chancellor Angela Merkel, Wen said China is still studying how it might lend further support.

"China is also considering increasing its participation in the solution of the European debt crisis through the channels of the EFSF and ESM," Wen said.

The ESM, a 500-billion-euro ($650 billion) permanent bailout fund that is due to become operational in July, is expected to replace the EFSF, a temporary fund that has been used to bail out Ireland and Portugal and will help in the second Greek package.

China, with its $3.2 trillion worth foreign exchange reserves, is often seen as a potential source for the funds that are needed to bail out some European governments.

China has repeatedly said it supports a stable euro, and according to most estimate, China has about a quarter of its foreign exchange reserves in euro assets.

However, Beijing has consistently been reluctant to make specific promises about any contributions to the rescue funds.

Merkel told reporters that Chinese leaders again stressed in their discussions that European leaders must do their homework first to resolve the eurozone crisis.

Ahead of Merkel's visit, few analysts expected her to come away with specific commitments and instead characterised the visit as a confidence-building effort as Germany seeks Beijing's support for the ailing euro.

Wen stated that it is very important for the euro debt crisis to be resolved and said Beijing will support Europe's efforts in stabilising the euro.

But he reiterated that Europe must rely on itself to solve its own problems.

Wen did not mention whether China would participate in the fund-raising by the International Monetary Fund (IMF), although he said he supported a bigger IMF role in addressing Europe's debt crisis.

China and other countries beyond the 17-country euro bloc want to see its members stump up more money before they commit additional resources to the IMF, which had requested an additional 500 billion euros in funding.