China Rebuffs Hopes It Might Help Bail Out Europe
SEPTEMBER 25, 2011, 3:21 P.M. ET
By BOB DAVIS
WASHINGTONóChina to Europe: Don't expect a bailout from us.
That was the message delivered by a number of Chinese officials during meetings at the International Monetary Fund, where China was widely seen as an answer to the euro zone's problems, either as a purchaser of European debt or as a country that could further goose its economic growth rate.
"We can't just go save someone," said Gao Xiqing, president of China Investment Corp., China's huge sovereign wealth fund. "We're not saviors. We have to save ourselves," he said at a weekend panel discussion
If Europe decided to issue euro-zone bondsódebt guaranteed by all euro-zone membersóCIC would consider becoming a purchaser, he said afterwards. "If it has a risk profile that fits into our allocation, we'll buy some," Mr. Gao said. "But don't expect us to buy more than our risk appetite would take."
That appeared to rule out CIC buying debt from Italy, Greece and other troubled euro-zone nations that are having the toughest time finding buyers.
Chinese central banker Zhou Xiaochuan was just as adamant that China shouldn't be expected to boost its growth rate in an unsustainable fashion to help out the global economy.
Currently China is growing at roughly a 9% annual pace. He said that growth of somewhere between 8% and 10% was a "reasonable expectation."
"Some people may have an irrational hope that the higher the growth, the better," he said at a Saturday news conference. But growth rates of 15% or higheró"that's not realistic," he said.
During the 2008-2009 financial crisis, China boosted spending by near 11 trillion yuan (about $1.7 trillion in today's dollars), which helped keep its growth above 9%, and powered the purchase of imports, particularly commodities. But another big stimulus plan is unlikely. That's because China sees inflation as a bigger threat than inadequate growth, and also because China worries that a large percentage of the loans made during the stimulus surge may go bad, saddling the government with a debt problem.
Mr. Zhou, governor of the People's Bank of China, also gave no indication that the crisis would lead to a change in China's currency policy. Since it allowed the yuan to float somewhat in June 2010, the yuan has appreciated at a rate of about 5.5% a year against the dollar.
IMF Managing Director Christine Lagarde urged China to let its currency strengthen more swiftly as a way to boost imports from the rest of the world. "A little bit of currency appreciation might help," she said.
At the very least, Mr. Zhou said, China wasn't likely to halt the rise of its currency as it did during the 2008 crisis, when it feared that a stronger yuan would further cut into exports.
He said 2008 was a special case where "international considerations may have let us put some calculations in our policy making." Current economic woes weren't of that magnitude, he said.
Write to Bob Davis at email@example.com