The euro-zone crisis - China to the rescue?
Autor: Acesso International Business | Publicado: 2011-10-30T08:33:00-07:00

     IT WAS only a matter of time before China was  heralded as Europe’s escape route from its debt crisis. News that  Nicolas Sarkozy, the French president, called Hu Jintao, his opposite  number in China, after the crisis summit on October 27th  sparked speculation that China might put substantial amounts of money  into the debt of troubled euro-zone borrowers. The chatter grew louder  when Klaus Regling, the head of the European Financial Stability  Facility (EFSF), the euro area’s bail-out fund, visited Beijing a day  later. And a poor post-summit Italian bond auction has made the need for  a deus ex machina seem even greater.China  certainly has lots of money to invest. its foreign-exchange reserves  are reckoned at $3.2 trillion. It trades more with the EU than any other  partner. It has exposure to the euro already. How much is not known,  but currency analysts suspect that about a quarter of those reserves are  already euro-denominated, giving it an incentive to keep the currency  strong. It also suits China to play the part of a constructive economic  actor.Then again, we have been here  many times before during the euro-zone saga. You can trace the growing  seriousness of the crisis by the list of countries that have had talks  with the Chinese about investments: first Greece, then Portugal, Spain  and now countries at the very core of the euro zone. The pattern to date  has always been the same: lots of encouraging rhetoric, perhaps even a  little cash, but not enough to meet initial expectations.There  is at least something different on offer now. In the past, investment  in euro-zone debt has meant taking on as much risk, and sometimes more  risk, than the Europeans themselves have been willing to absorb. No one  could ever explain why the Chinese would want to do that. Now China will  be able to choose to invest in euro-zone debt that is ensured by the  EFSF, or to buy senior tranches of the special-purpose vehicles (SPVs)  that the EFSF will capitalise. China would explicitly be taking less  risk than the Europeans.That helps, but  probably not enough to deliver a different outcome. The Europeans are  taking more risk but that does not mean that they are offering lots of  protection to other buyers. And it will take time for these structures  to be set up: China will want lots more detail, and to see how the Greek  bond swap with private creditors goes, before it commits cash.Grand  political bargains between China and Europe—money in return for more  representation at the IMF, or market-economy status—seem wildly  improbable. These prizes will eventually come anyway; and weak though  parts of Europe are, the EU cannot be seen to trade them too nakedly.  Bargaining of this sort would also require both parties to change their  positions markedly. China is keen not to be seen as a source of “dumb  money”, but requiring big political concessions in return for cash is a  pretty clear signal that this is not a commercially attractive  investment. As for the euro zone, it can hardly claim that senior  Spanish and Italian debt is now safe for institutional investors if it  has to horse-trade too hard to get China on board.That  does not mean that Mr Regling’s trip, which now takes him to Japan, is  wasted. It is plausible that China will put some money into euro-zone  debt alongside other non-European countries. How that money could be  used depends a bit on whether it is channelled by the IMF or some other  means. One option might be for other governments jointly to invest in a  thick junior tranche of an SPV so that private investors would have an  even greater cushion protecting them from any losses. A financial  vehicle that saw the euro zone take most risk through equity, other  governments a bit more through subordinated debt and private-sector  investors the least through senior debt is still a long shot. But it is  more realistic than expecting China to splash enough cash to save the  euro.

fonte: THE ECONOMIST: http://www.economist.com/blogs/freeexchange/2011/10/euro-zone-crisis-4