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Eurozone seeks bailout funds from China

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Eurozone seeks bailout funds from China

Post by momopi » October 31st, 2011, 6:14 am

28 October 2011 Last updated at 07:51 ET
Eurozone seeks bailout funds from China

The head of the eurozone's bailout fund is beginning attempts to persuade China to invest in a scheme to help rescue member countries facing debt crises.

After meeting Chinese leaders, Klaus Regling said there were no formal negotiations and would be no deal now.

It is thought China may pay about 70bn euros ($100bn) into the fund, which is expected to be boosted to 1tn euros.

Meanwhile French President Nicolas Sarkozy said debt-ridden Greece's entry to the eurozone was a mistake.

Greece was "not ready" when it joined in 2001, he said, adding that it could be rescued thanks to a new deal on the debt crisis.

European leaders worked into the early hours of Thursday in Brussels to secure an agreement aimed at preventing the crisis from spreading to larger eurozone economies.

The deal triggered a worldwide shares rally.
'Regular buyer'

Beijing has made it clear that it will demand strong guarantees on the safety of any contribution it might make.

Mr Regling, who is chief executive of the European Financial Stability Facility (EFSF), said he was not negotiating with China as a potential investor but holding consultations to decide the terms for raising the money.

"Don't expect any precise outcome of our talks," he said, quoted by AFP news agency.

"I cannot say today, and it's certainly far too early to say what kind of amounts might be envisaged."

He said China had been a regular buyer of EFSF bonds in the past.

He would present the fund's bonds as a potential commercial investment to China, he said, adding that Beijing regularly needed to find safe investments for its trade surpluses.

"I am optimistic that we will have a longer term relationship," he said.

Chinese Vice Finance Minister Zhu Guangyao said there was work still to be done.

"We need to wait for the technicalities to be clear and also to carry out serious studies before we can decide on investment," he said, quoted by AFP.

"We hope that all these technical and specialised arrangements can be thrashed out at an early date and can be implemented and feasible. That will be very important for the effectiveness" of the fund.

The President of the World Bank, Robert Zoellick, has said he believes China will invest in Europe only if there are incentives for it to do so.

"I don't think that China will just come in as a white knight to try to provide money just to bail out Europeans," he told the BBC.

But investor Jim Rogers said China was prepared to help.

"From China's point of view, it's cheap foreign aid. They'll buy goodwill. I guess they'll put up some money," he said on BBC Radio 4's Today programme.

The suggestion that China should use its financial clout to assist the eurozone met with mixed reactions on the streets of Beijing.

"If we have the ability to help them then we should, but there is no feeling of pride in that," said Xu Juan - a 27-year-old employee of an international trade firm.

"We need to focus on doing a good job on developing our own country."

Wang Xiaodong, a 23-year-old univeristy student, said "With the global economy everybody prospers together or becomes weaker together, so we just have to endure this tough time together."

The framework for the new EFSF bailout fund is to be put in place in November.

Germany, as the largest economy in eurozone, is expected to be the largest contributor.

Asian markets rose for a second day on Friday and bank stocks in Europe continued to rally, a day after the deal was reached.

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Post by momopi » October 31st, 2011, 6:15 am

28 October 2011 Last updated at 09:13 ET
What would Chinese cash for eurozone bailout fund mean?
By Jorn Madslien and Laurence Knight BBC News

With some $3.2 trillion (£2tn) in its foreign reserves coffers, China may well be a natural contributor to the eurozone's bailout fund.

But the fact that China is a wealthy country, and therefore able to help, does not explain why China would actually want to do so.

One obvious reason might be a desire to prevent the crisis from leading to a recession in Europe - China's biggest export market.

Moreover, if the eurozone crisis were to spread globally - just as the US mortgage crisis did in 2008 - not only could it damage China's other trade partners, but also China itself.

Beijing recently had to intervene to shore up its own banks, which many investors fear are riddled with bad debts. Another global financial crisis could leave those banks in even worse shape.
Feeling the pinch

With consumers in Europe - and indeed in the US - already scaling back consumption and repaying personal debts, the demand for stuff made in China is slowing and could stay weak for years.

On the domestic front in indebted European countries, a reduction in imports is generally deemed beneficial, as it helps reduce their trade deficits. Or to put it another way, if consumers cut back, it is better for a country if they spend less on stuff made abroad and maintain spending on goods made at home.

But of course, China is not the only one that will take a hit as global consumption and trade slows to a trickle. Exporters - especially in trade surplus countries such as China, Japan or Germany, but also in trade deficit countries - will feel the pinch.

In turn, this general reduction in global trade will cement stubbornly high unemployment levels in the industrialised world, doing little to alleviate the crisis or to reduce the risks of it spreading beyond Europe.

But to the extent that the burden of shrinking demand falls on exporters like China, that means more of the job losses will be Chinese jobs.

Indeed, as global demand weakens, there is less point in keeping up massive investment in manufacturing in China. So perhaps it would be better to invest elsewhere?
Sound investments

China has long said it is eager to invest in Europe. But there are different ways for it to do so.

The one discussed in the context of the eurozone bailout fund would be an investment in European bonds, which equates to lending money to European governments.

This is not to say China is about to lend money directly to countries that need it the most.

Buying Spanish or Italian bonds may not be a tempting proposition, while buying German bonds clearly is, as they are deemed more likely to be repaid in full.

China has made it clear that it would only want to make sound investments, so it would require guarantees.

A Chinese contribution to the European European Financial Stability Facility (EFSF) would thus, in practice, differ little from a loan to Germany.

And that, of itself, would do little to help the likes of Spain and Italy manage their finances.

Indeed, Michael Pettis, international finance professor at Beijing University, says that Europe - or at least Germany - has plenty of capital of its own, and shouldn't even need China's money.

He says that if China invests more capital in Europe, it may perversely end up putting more Europeans out of work.

By increasing its total investment in the eurozone, China is likely to push up the euro's value.

And that would make the eurozone's exports less competitive in international markets and Chinese exports more competitive in Europe - hardly an outcome that will help struggling Mediterranean countries.
Direct investment

Moreover, investing in government bonds is a very different proposition from investing in assets such as buildings, factories or infrastructure - the sort of investments that would deliver economic growth and create jobs.

Such investment is hard to come by these days, and transferring eurozone government debts from Europe's banks to China is not expected to do much to alleviate the situation.

As European governments repay their loans to the banks, the cash is likely to be absorbed by banks to help them with their recapitalisation. So it may not result in fresh funds being freed up for loans to companies.

In other words, Chinese investment in European bonds may do little to bolster economic growth in Europe.

Chinese investment directly into the real economy in Europe could well have a much greater effect.

Whether European voters would welcome Chinese buyers of real estate, companies and roads at a time when prices are depressed by the ongoing crisis is another matter.

But compared with the non-tangible rewards China is likely to demand in return for formal financial support - such as an early European Union recognition as a market economy, greater voting rights within the International Monetary Fund, a lifting of a ban on European arms sales to China, or silence around the matter of China's supposed efforts to keep its currency artificially weak - that may be a small price to pay.

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Post by momopi » October 31st, 2011, 6:15 am

30 October 2011 Last updated at 21:16 ET
ECB head says Chinese help for eurozone is 'normal'

The president of the European Central Bank has denied that eurozone countries are going "cap in hand" to China.

On the eve of his departure from the ECB's top job, Jean-Claude Trichet said the move was "absolutely normal".

The head of the European Financial Stability Facility (EFSF) has been meeting Chinese officials in an effort to boost the bailout fund.

Mr Trichet hands over the reins of the ECB to the Italian central banker, Mario Draghi, on Tuesday.

Klaus Regling, chief executive of the EFSF has travelled to Beijing where he is reportedly seeking a pledge of $100bn from China.

China's President Hu Jintao arrived on Sunday in Vienna for a state visit, before the crucial G20 meeting in the French resort of Cannes on 3 and 4 November.

Mr Hu's visit to Europe, his second in a year, comes after EU leaders last week appealed to China to invest in the region's debt rescue fund, to help it overcome a spiralling debt crisis.

But China's Vice-Finance Minister Zhu Guangyao played down hopes of a breakthrough at the G20 summit, insisting investment in the European bailout fund was not on the agenda.
'Benign neglect'

Mr Trichet's tenure at the ECB, will probably be defined by the sovereign debt crisis, although for the first half of his eight years in the job, the eurozone economy grew at a respectable rate, inflation was moderate and the financial system was stable.

In an interview with the BBC's economics editor, Stephanie Flanders, the outgoing ECB chief has now said that Greece should have come under greater scrutiny before it joined the euro.

"With the hindsight they (the governments of the eurozone) should have applied rigorously the rules that existed in the euro area," he said.

Last week, the French President, Nicholas Sarkozy, said Greece should not have been allowed to join the single currency in 2001.

Mr Trichet said when Greece was let into the euro club, there was an atmosphere of "benign neglect".

"The benign neglect, which was the benign neglect of the markets, the benign neglect I have to say also of the governments, individually and collectively, let the thing go."

Some analysts claim the ECB did not respond quick enough to the crisis. Mr Trichet countered such criticism by pointing out that the ECB was the first central bank in the world to provide the financial system with liquidity back in 2007.

Having come to office during a period of relative calm, Mr Trichet hands the baton to Mario Draghi during the eurozone's biggest-ever crisis.

But Mr Trichet told the BBC that, while there is hard work ahead, the crisis can be solved.

"We know where we go, but we have to take into account the storms, and we are in a stormy period at a global level", he said.
Super Mario

His successor will spend his last working day in Rome looking anxiously at the performance of Italian government bonds and bank shares as markets reopen after the weekend.

Amid the turbulence on the Italian financial and political scene, the Bank of Italy is regarded as the one institution that has retained its international prestige.

Known as Super Mario, Mr Draghi has restored credibility to the bank since he took over as governor six years ago, after it had been tarnished by a scandal involving his predecessor Antonio Fazio.

Mr Fazio was accused of insider trading and may still face trial.

Mr Draghi has already warned that the European Central Bank, which has been purchasing massive quantities of Italian government debt in recent weeks, cannot continue to do so indefinitely.

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Post by momopi » October 31st, 2011, 6:22 am

BBC publish news in 27 languages, and the articles are not the same. For example, I think the English edition didn't publish this: (use Google translate if needed): ... rope.shtml

And the discussion forum: ... =0&zh=trad

The response from Chinese side is generally negative. Europeans have higher standard of living than Chinese, so they don't see why the poor person have to give money to bail out the rich person.

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Post by Repatriate » October 31st, 2011, 6:42 am

They'd have to be suckers to lend surplus liquidity to debtors who are in turn turning around and imposing heavy restrictions on Chinese exports. It's using the developing world to fuel the developed world's lifestyle.

I doubt they'd ever see a single RMB returned from the EU zone either.

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Post by momopi » October 31st, 2011, 7:05 am ... 001401.htm

China waits for clarity on EU bailout fund
Updated: 2011-10-29 07:47
By Chen Jia and Zheng Yangpeng (China Daily)

BEIJING - Senior Chinese officials said on Friday that the country would not inject more capital into the EU's bailout fund before more rescue details have emerged.

However, the country will keep an open mind toward all discussions on further investment into the European Financial Stability Facility, said Zhu Guangyao, Chinese vice-finance minister, at a news conference in Beijing on Friday.

"China has already invested in the fund, and additional contributions are still under discussion," said Zhu.

"It will take more time to carry out studies before making an investment decision," he added.

Klaus Regling, chief executive of the fund, visited Beijing on Friday to meet officials with the Ministry of Finance and the central bank, just one day after the outcome of the Eurozone rescue plan.

"The country has particular needs to invest in foreign bonds every month because of its currency account surplus, and the fund will continually offer good products for China," Regling said on Friday.

He expressed his hope for building a long-term relationship with China, which holds the world's largest foreign-exchange reserves, but declined to give details of any potential Chinese investment in the bailout fund.

China, which has $3.2 trillion in foreign exchange reserves, was "interested in finding attractive, solid, safe investment opportunities", he said.

Zhu said that no specific plan about increasing investment in the rescue fund was discussed with Regling. In addition, G20 member countries will not talk about any plan to purchase the fund's bonds when they meet next week in Cannes, France, Zhu said.

Chairman of the China Banking Regulatory Commission, Liu Mingkang, also said on Friday that the nation has not considered specific measures allowing Chinese banks to invest in the fund to help stem the region's debt crisis.

"China's economy is slowing and they may well want a war chest to support their own economy," Julian Jessop, chief global economist at London research house Capital Economics, was quoted as saying by AFP.

According to Regling, the EU rescue fund may explore setting up a special purpose instrument with the International Monetary Fund to channel money from member countries.

European leaders struck an agreement on Thursday to rescue Greece from the ongoing crisis by writing down 50 percent of its debt and expanding the Eurozone's bailout fund to 1 trillion euros ($1.4 trillion) from 440 billion euros.

The fund is designing new investment instruments for global participants in order to expand and diversify portfolios.

Many analysts said it may be a good chance for China to win goodwill, which could lead to payoffs by helping Europe. Recognizing the country as a "market economy" and reducing Sino-EU trade frictions were seen by global media as China's bargaining chips.

The head of the Eurozone's bailout fund said that there was no plan to discuss any concessions with the Chinese authorities during this trip.

Ding Yifan, deputy director of the World Development Research Institute at the Development Research Center of the State Council, said on Friday that China should think better of whether to participate in the rescue of the Eurozone's debt.

"Helping the EU could be an opportunity to improve China's influence in the international financial system. But it doesn't mean that Beijing is anxious to ask for instant benefits and extra advantages," said Ding.

"The premise for China to help EU countries is to make sure that the foreign-exchange holdings are safe," said Peng Wensheng, chief economist with China International Capital Corp.

He said that the country could ask for help from the IMF and other multilateral agencies to improve the investment regulations.

China also suggested encouraging more private capital to invest in the Eurozone, Peng said.

Yang Ning and Chen Keyu contributed to this story.

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Post by Repatriate » October 31st, 2011, 7:32 am

Throwing good money at bad money in the financial investment shell game. EU investment bankers and funds are pretty much just as crooked as U.S. firms like Goldman Sachs.

It would be far wiser to invest in EU real estate or other physical holdings. It sounds like China's investment heads are smart enough to realize this.

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Post by momopi » November 2nd, 2011, 8:25 am

Saab escapes bankruptcy as Chinese firms take over

Business, World Friday, October 28th, 2011

Beleaguered Saab appears to once again have narrowly avoided bankruptcy, announcing on Friday that two Chinese companies will buy it for 100 million euros ($142 million), making it the second Swedish carmaker after Volvo to take the road to China.

“After the better part of seven months of agony for the company we have come to a point where we can proudly say that we made it,� Saab’s chief executive Victor Muller, who has been scrambling for months to secure enough funding to keep the company afloat, told a conference call from Amsterdam.

His comments came after Saab’s Dutch parent company Swedish Automobile (Swan), also headed by Muller, announced Chinese companies Youngman and Pang Da had agreed to buy the struggling carmaker for 100 million euros.

The deal, which still requires approval from a long line of interested parties, follows numerous other funding attempts to keep Saab going, including an agreement in July with the same two Chinese companies that earlier this week appeared to have fallen through.

Pang Da and Youngman had agreed to inject 245 million euros into the company in a deal including joint ventures and about half of Saab’s shares; they also agreed to provide 70 million euros in bridge funding to tide the company over during a three-month restructuring that began in September.

However, late last week, Saab’s court-appointed administrator Guy Lofalk applied for the reorganisation to be halted — a move that would effectively have put the company at the mercy of its creditors and likely pushed it quickly into bankruptcy — deeming that the funding deal had collapsed.

Swan also said Sunday it had terminated the deal since its Chinese partners had failed to provide the agreed funds and had instead offered to purchase all of Saab.

But after deeming the initial undisclosed proposal “unacceptable,� Muller said Friday the terms had been dramatically renegotiated and were now favourable, while Lofalk withdrew his petition to abandon the reorganisation.

Muller pointed out that Youngman, which will take 60 percent of Saab, and Pang Da, which will take the remaining 40 percent, had agreed to provide long term funding to Saab that was “way in excess of the (245 million euros) in the original agreement. It will probably be more like double that amount.�

Muller said the two new owners wanted to continue making cars at Saab’s factory in Trollhaettan in southwestern Sweden, brushing aside concerns over moving production to China.

Saab “will follow, I hope, the example set by Geely with Volvo,� he said, referring to the Chinese company that bought Sweden’s other famous car brand in August 2010 for $1.5 billion.

“There was a lot of skepticism about that transaction but I think that everybody has seen by now that that scepticism was unjustified,� he said.

Swedish Prime Minister Fredrik Reinfeldt welcomed the deal, pointing out to public radio that “it is important to do something to secure the jobs we have worried would disappear from Trollhaettan.�

Speaking of Youngman and Pang Da, he said they “appear to be strong owners who are working in the world’s fastest-growing car market.�

Suppliers and unions representing Saab’s some 3,700 employees, who are waiting for delayed salary payments for the fourth straight month, also expressed optimism Friday, and several analysts said it was the best and most logical solution to Saab’s woes.

Muller acknowledged that the main obstacle would be getting all the necessary approvals — from the Chinese authorities, the European Investment Bank, the Swedish debt office and Saab’s former owner General Motors.

The latter is expected to be the most difficult to get onboard, due to among other things, concerns over its technology going to China.

Muller nonetheless said he thought all the stamps of approval would be secured within a few weeks and that production, which has been halted basically since April, could start up again about two months later.

Swan, formerly known as Spyker, rescued Saab from the brink of bankruptcy early last year when it bought the company from GM for $400 million.

It has been a rocky road since then and suppliers began halting deliveries in April over mountains of unpaid bills.

Muller cautioned some layoffs would likely be necessary going forward and said his own role in Saab’s future had yet to be determined.

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Post by momopi » November 6th, 2011, 10:12 pm

For those unfamiliar with NWA TV, they also do Weather Girl videos every week:

[youtube] ... ure=relmfu[/youtube]

At the end of the video, she did a "nyan nyan cat pose".
Last edited by momopi on November 7th, 2011, 2:04 am, edited 1 time in total.

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Post by Taco » November 7th, 2011, 12:24 am

momopi wrote:

For those unfamiliar with NWA TV, they also do Weather Girl videos every week:

[youtube] ... ure=relmfu[/youtube]

At the end of the video, she did a "nyan nyan cat pose" like this:

Yeah, China has the best weather in the world right now!

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