China reiterates its willingness to buy European bonds

Frank-Jurgen Richter: "Break-up of the euro would be a catastrophe for Asia"

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A top Chinese official has said China is willing to buy bonds issued by debt-burdened European nations, reinforcing a stance taken by Premier Wen Jiabao.

The comments were made by Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission.

A number of European economies are facing a funding crunch.

China, the world's second largest economy, has more than $3 trillion (£1.9tn) in foreign exchange reserves.

Mr Zhang underlined China's willingness to use that cash to prop up Europe's creaking economies.

"For the countries experiencing sovereign debt crisis, we are willing to lend a helping hand... to buy some of their bonds," Mr Zhang explained.

'No de-coupling'

At present the biggest risk is faced by Greece, with many analysts claiming it is only a matter of when, rather than if, it defaults on its debt obligations.

Start Quote

The government has realised that Europe has a lot of areas, sectors, technologies and brands that are at the heart of Chinese growth”

End Quote Andre Loesekrug-Pietri A-Capital

The worry is that the problems in Greece will destabilise the global economy, hurting both China and Asia as a whole.

"Most exports from China and south-east Asia actually are going to Europe. A break up of the euro would be a catastrophe for Asia," Frank-Jurgen Richter, chairman of the independent think tank Horasis, told the BBC.

"There is no de-coupling anymore, we are living in a globalised world. Every move in Europe will directly influence and impact Asia," he added

On Wednesday at the World Economic Forum, China's Premier Wen Jiabao said it was important to prevent the debt crisis in Europe from spreading further.

"I think Wen Jiabao's move to support Europe is the right way to go and Europe should accept this offer for [a] bailout coming from China," Mr Richter said.

Broader investment

William Rhodes: "China will play its part but the world can't expect China to bail them out"

Mr Zhang went on to say that China also wanted to use its reserves to invest in companies abroad and hoped that the lure of job creation would help make this process easier.

Analysts said investing in businesses was a part of the long-term growth strategy of China.

"The government has realised that Europe has a lot of areas, sectors, technologies and brands that are at the heart of Chinese growth," Andre Loesekrug-Pietri from A-Capital, a Chinese private equity fund for outbound investments, told the BBC's Asia Business Report.

"All these companies that have grown due to a low-cost basis now realise that they need to go to the next step and have technologies that make a difference and brands that have customer loyalty," he added.

Mr Pietri explained that Chinese companies had begun to realise that having the latest technology and good brand value were key to avoiding any disruptions to growth during times of uncertainty.

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