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Ironic EU Begging Expedition to China
Wolf Richter www.testosteronepit.com
Europe returned from its begging expedition to Beijing empty-handed. Well, they called it a summit, but it was an unmitigated begging expedition, one more in a series. Jose Manuel Barroso, President of the EU Commission, and Herman Van Rompuy, President of EU Council, were talking to Premier Wen Jiabao, trying to lure China into plowing part of its hard-earned foreign exchange trillions into the European bailout fund, the EFSF. And they made that dreadfully convoluted and opaque creature smell like a rose, expounding with habitual European finesse and nuance on its guarantees and loss mitigation provisions backed by countries like Italy and Spain that can barely keep their nose above water.
Even a small amount would have been something. Anything really. Just so that they wouldn’t have to fly home empty-handed. And once they got their foot in the door, surely, there’d be ways and means to get the other foot in as well. But rather than kick out the conniving beggars, Wen smiled and declared soothingly, as always, that Europe was an important partner, and that China and the EU would work together to solve the debt crisis.
But where's the money? It appears that buying sovereign bonds of debt-sinner countries that are veering towards insolvency and need of an ever larger flow of cheap money to pay off old investors and teetering banks just isn't a lot of fun.
China has its own problems on the horizon—and some, like a popping real estate bubble, on its doorstep. No one knows where this will end up, but real estate won't experience a soft landing, nor will the construction business. Foreign direct investment is down, well just a smidgen, but the Ministry of Commerce warned that the outlook for FDI was outright "grim." And then it turned out that China reduced its holdings of US Treasuries, down to $1.1 trillion, the lowest since June 2010.
The Chinese people, some of whom had bought apartments that dropped 30% in value since, aren’t particularly eager to help a distant continent, though, judging from the masses of Chinese tourists in Europe, they're doing quite a bit to help out. Just not for free. Perhaps they remember the past when the West lectured China on a laundry list of issues, from capitalism to human rights and democracy, and when French President Nicolas Sarkozy got into a pissing match with China just before the Beijing Olympics. Anti-Chinese sentiment ran high in France at the time. But that was 2008. Now, the Eurozone is steeped in a debt crisis, and even France’s most coddled industry—fine wines—got slapped in the face. By China. Read.... Merde! Chinese Wines Did What to French Wines?
Barroso and Van Rompuy assured the world that they’d talked to Wen about other issues as well, the usual crowd pleasers: better market access for European companies and better protection of intellectual property. Even Syria came up. They’re trying to do what US Presidents and Secretaries of the Treasury have done for years: regular begging expeditions to Beijing, dressed up as diplomatic discussions. But China is less interested in crappy sovereign bonds than in productive assets that offer strategic advantages, certain technologies, and access to markets. It’s a government policy. State-owned enterprises, the sovereign wealth fund CIC, and some private companies are actively pursuing it.
Meanwhile, the ever-worsening Eurozone debt crisis has frayed a lot of nerves, particularly among Greek politicians, whose country is on the verge of bankruptcy, and among German politicians, who no longer trust Greek politicians. But now, a far bigger confrontation at the very core of the Eurozone is shaping up, one that may turn into a debacle with epic consequences.... François Hollande v. the German Dictate.
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new spin on beggar thy neighbor
Pay attention to the last line as that says it all "epic consequences.... François Hollande v. the German Dictate." The ECB and others keep trying to circumvent Germany and print to keep Greece alive and tell Germany their just going to have to back it as they're on the hook for it by treaty. Everyone is trying to second guess when or if Greece will be shown the door when the correct German response is for Germany to exit the EURO. Remember those marks they had printed? Just think about what the fallout would be. Just possibly a German Europe without a shot fired?
Chinese politicians might just give their European counterparts what they wish. Don't expect them to be any more competent or prudent than Bush / Obama / Merkel / Sarkozy. They are all the same.
One wonders what China must make of such non entities as Barroso and Van Rompuy. Yes they, like the US, must afford them diplomatic status but as Niger Farage remarked Van Rompuy looks like a low level bank clerk and Barroso is nothing but a washed up politician from a second rate ( and bankrupt) nation. Afterall the Chinese had just met with Angela Merkel and told her no and she represents something the Chinese do understand 'real power' derived from heading a real nation with real influence. The EU, to Chinese eyes, must appear not all that different than the Vatican did to Josef Stalin. More irritant than influential, clucking on about imaginary relationships. Where is your Kissinger, your Rumsfeld Wen must have thought as he looked at the bloated Barroso and shabby Van Rompuy.
An unholy bargain is afoot...bailout in exchange for calling off the carbon credit watchdogs.
They are not as convincing as in 2008 when Wall Street convinced The Middle Kingdom to buy Blackstone...right before it plunged 60% and China got their Butts whipped. I think they lost about $300 million in three weeks.
Maybe they learned a lesson? Buy commodities...not paper crap.
If the dragon people were smart, they would say,"ok, we'll lend you XXX Billions but place your gold here, physically, as collateral."
i believe the technical term is "KOW TOWING" actually. And oh yeah...you forgot to add "the Americans" to the list too. What a mess. At least someone knows how to run a country out there...
Well China just showed them how happy it is with their Economic Embargo on Iran, .. here have a taste of you own medicine a Debt Embargo on Eurpe from China with Love
The question remains where is Chinas advantage in joining an Euro bailout ?
Buying into overpriced de facto unsecured debt gives no access to new technology, raw materials, new markets, guaranteed interest repayments or even capital.
Expecting China to join in a pyramid debt scheme insults that country.
Could you imagine a meeting and that sniveling little prick Van Rompey shows up?
Except...if the analysis is correct about the EU perspective of looking for desperate expedients on a sinking ship; it doesn't tell us much of China's great game to tame US hegemony, using the EU crisis as a wedge to break western cohesion.
China has its own long term plan, and its MAIN adversary is US hegemony. It will do all it can, connive with EU zone, spanner the ME petrodollar stand-off in Syria, build RM firewalls with BRIC partners to ensure that PAx Americana weakens along with Euro meltown; not too much to bring the whole world economy down, but enough to make China's emerging hand more and more dominant.
Time is China's ally against Atlantic first world dominance. The Economic and geo-political pendulum moves East n SOuth. No doubt about that, that's their long term plan.
Man! Nail, meet the Hammer of TesteronePit's flawless analysis!
BRAVO!
[quote]
The Chinese people, some of whom had bought apartments that dropped 30% in value since, aren’t particularly eager to help a distant continent, though, judging from the masses of Chinese tourists in Europe, they're doing quite a bit to help out. Just not for free.
But where's the money? It appears that buying sovereign bonds of debt-sinner countries that are veering towards insolvency and need of an ever larger flow of cheap money to pay off old investors and teetering banks just isn't a lot of fun.
[/quote]