Europe looks to China for help with bailout fund

The Chinese currency, Renminbi (RMB), Tuesday rose 33 basis points from previous trading day to a record high of 6.4470 against the U.S. dollar.

Jeremy Hobson: Well now to Beijing - which as it turns out is the new center of the European Debt Crisis. The head of the euro bailout fund is there today, asking for money to boost the size of the fund by tens of billions of dollars.

Here's Marketplace's Stephen Beard.

Stephen Beard: The Europeans plan to boost the firepower of their bailout fund to $1.4 trillion. European governments can not afford -- or do not want -- to put up the extra cash themselves. So they're asking China to make an investment. The Chinese have the biggest foreign currency reserves in the world, and they have already put €6 billion into bailout fund.

But China expert Kerry Brown from the Chatham House think-tank says a request for a much bigger sum might raise a few eyebrows in China.

Kerry Brown: You've got a kind of euro zone where the per-capita GDP is at least seven times what it is in China. And yet they're being asked to come and bail out Europe. It's a perception issue; it's the sort of idea that they are having to help out rich countries remain rich.

But he believes the Chinese may be ready to help their biggest export market: the euro zone. And they do want to diversify away from their huge U.S. dollar holdings.

In London, I'm Stephen Beard for Marketplace.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.


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