When in doubt, recycle... In this case the rumor that China would bail out Europe is about to get second billing. From Bloomberg, quoting Wen Jiabao at the Dalian World Economic Forum:
- WEN SAYS CHINA WILL CONTINUE TO INCREASE INVESTMENT IN EUROPE
- WEN SAYS CHINA IS WILLING TO EXTEND HELP TO EUROPE
Granted, nothing new here, and it simply means that China will be happy to buy European assets at firesale prices and invest in 20%+ IRR projects, but the algos, which have not yet seen this news, are expected to kneejerk higher, regardless of how short the latest intervention halflife will be (recall that China already has sizable investment in Greece, Portugal, the EFSF and the EUR). Call it what it is - doubling down, all over again. That said, the bailout for Europe will not come free, and once that realization hits the market, this may have a completely opposite reaction that the one intended...
- WEN SAYS EU SHOULD RECOGNIZE CHINA'S MARKET ECONOMY STATUS
- WEN SAYS HOPES FOR BREAKTHROUGH AT CHINA-EU SUMMIT NEXT MONTH
Ah yes, quid pro quo Clarice. If Europe will be so kind to align itself with China in all future WTO escalations against the US, it will be much appreciated. After all, there is nothing more a mercantilist country needs than a subservient import partner. Ergo, any vile ideas about duties, subsidies and/or tariffs?.... Yeah, those are gone. Permanently.
In other words, if Europe likes it status quo, it sure as hell better like being part of the Sino-Russian axis in the coming trade wars, which incidentally will define the next reserve currency in 2-3 years.
Said otherwise, China may not have won the currency wars (the first round), but it is well on its way to winning the trade war (round two).
We all know what round three is...
And some additional info from Xinhua:
Chinese Premier Wen Jiabao said on Wednesday that the nation's opening up to the outside world is a long-term commitment which covers all fields and is mutually beneficial.
"China's basic state policy of opening up will never change," Wen said in a keynote speech at the opening of the World Economic Forum annual meeting of "New Champions 2001", a three-day event held in the city of Dalian in northeast China's Liaoning Province.
"We will continue to get actively involved in economic globalization and work to build a fair and equitable international trading regime and financial system," he said.
"We will continue to improve foreign-related economic laws, regulations and policies so as to make China's investment environment in keeping with international standards, transparent and more business friendly," he said.