The "China Bails Out Europe" Rumor Is Back
It's been a while since the ridiculous "China bails out Europe" rumor made the scene: in fact, the last time we can find with definitive confirmation was back in September of 2011, just before the bottom fell out of Europe, and when the FT, based on "anonymous sources" tripped over itself to report that "[insert European country] is in talks with China to buy bonds, assets." Sure enough, now that Merkel came, and saw, but hardly conquered Beijing, it is the turn of China's Wen Jiabao to add his 10 pips to the EURUSD rumormill: Reuters reports: "China is prepared to buy more EU government bonds amid a worsening European debt crisis that is dragging on the world economy, Premier Wen Jiabao said, in the strongest sign of support for its biggest trading partner in months." Naturally, considering how often this rumor (re)appeared in the past it will be excusable if nobody but the dumbest vacuum tubes fall for it this time, especially considering that the Chinese economy itself is going down in flames faster than the October Iron Ore contract. And lest there be any confusion, China's commitment is about as definitive as a Best Buy LBO "preunderwritten" with a Jefferies highly confident letter: "China is willing, on condition of fully evaluating the risks, to continue to invest in the euro zone sovereign debt market, and strengthen communication and discussion with the European Union, the European Central Bank the IMF and other key countries to support the indebted euro zone countries in overcoming hardships," [Wen] said after meeting Merkel." Ah, conditional aid. The kind that gets Mario Monti to break out the petulant ex-Goldman child act and refuse to leave the Belgian catered dining room until the beggees succumb to his technocratic platitudes. Needless to say, we'll believe China's "continued" investment in Europe when we see it.
As to what China's premier really thinks, here it is:
Wen... said he remained worried about the crisis in the euro zone.
"Recently, the European debt crisis has continued to worsen giving rise to serious concerns in the international community. Frankly speaking, I am also worried," Wen told a news conference.
"The main worries are two-fold: first is whether Greece will leave the euro zone. The second is whether Italy and Spain will take comprehensive rescue measures. Resolving these two problems rests with whether Greece Spain, Italy and other countries have the determination for reform."
He said a briefing by Merkel assuaged his concerns slightly, but warned that no quick resolution for the crisis is in sight, underscoring Beijing's worries about the debt problems in Europe, China's biggest trading partner.
"After I heard her views, it increased my confidence. But I must honestly say, the implementation of these measures won't be completely smooth," Wen said.
China's latest promise to buy more European sovereign debt if certain conditions are met encapsulates Beijing's hitherto cool response to Europe's requests for financial aid.
Attempts by the head of one of Europe's rescue funds to get funding from China last year floundered on Beijing's fear that it was not getting sufficient protection against losses.
Considering that nothing has changed since then except a lot more jaw, and recently, fingerboning by the Goldman head of the ECB, coupled with Europe down to its last snickers bar wrapper as money good ECB collateral, one can see why one would be skeptical to buy any of this. Except for the EURUSD algobots. If only for 5 minutes.