Support our non-partisan non-profit newsroom 💜 Donate now

Is it wise for China to buy Europe debt?

Rob Schmitz Oct 4, 2010
HTML EMBED:
COPY

Is it wise for China to buy Europe debt?

Rob Schmitz Oct 4, 2010
HTML EMBED:
COPY

TEXT OF INTERVIEW

STEVE CHIOTAKIS: Chinese Premier Wen Jiabao began a week-long tour of Europe. His first stop? Greece, where the premier promised China would continue to buy Greek bonds. Now that’s a morale-booster for a country suffering under a mountain of debt. Marketplace China Bureau Chief Rob Schmitz is with us from Shanghai with more. Good morning, Rob.

ROB SCHMITZ: Good morning, Steve.

CHIOTAKIS: So there are signs that China’s been buying up more European debt and shedding some of its U.S. debt as well. What’s happening here?

SCHMITZ: Well, the European Union is China’s biggest export market. But, as we’ve seen, the economies of Greece, Spain, and Italy — just to name a few — are in a fiscal crisis right now. They need capital. China’s willing to provide that capital because China knows that without it, these countries are going to run out of the money. And if that happens, they won’t be able to buy Chinese goods. If you look at the deal Wen made in Greece, it kind of gives you an indication of where China’s intentions lie.

CHIOTAKIS: Now I read, Rob, that Wen announced the creation of a $5 billion fund to help Greek shipping companies.

SCHMITZ: Right. But Greece has to use that money to buy Chinese ships. So for Greece, this means more ships. For China, this means more jobs and that’s exactly what China needs.

CHIOTAKIS: Is it wise, Rob, for China to be buying the debt of countries like Greece that are teetering on the brink of bankruptcy?

SCHMITZ: That’s a great question. China’s relatively new to this position as the world’s bank, and some economists think China’s inexperience may lead to some problems. But it’s clear that Greece and the other debt-ridden EU countries are thrilled by Wen’s visit. Last year when Wen visited Europe, someone threw a shoe at him. It’s probably a good bet European leaders will do their best to make sure that doesn’t happen again.

CHIOTAKIS: All right. Marketplace’s China bureau chief Rob Schmitz joining us from Shanghai. Rob, thanks.

SCHMITZ: My pleasure.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.