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China says ready to help solve EU debt crisis
by Staff Writers
Beijing (AFP) Feb 14, 2012

China's Premier Wen Jiabao said Tuesday his country was ready to increase its participation in efforts to resolve Europe's debt crisis, after holding talks with EU leaders in Beijing.

Wen said China wanted to see Europe -- its biggest trading partner -- "maintain stability and prosperity", a day after ratings agency Moody's downgraded Italy, Spain and Portugal.

The two sides also agreed during the talks to give fresh impetus to Beijing's efforts to attain full market economy status (MES) for China in the European Union, according to a joint communique issued after the summit.

"China is ready to increase its participation in resolving the EU debt problems," the Chinese premier told journalists after meeting EU president Herman Van Rompuy and European Commission president Jose Manuel Barroso.

China was considering using Europe's bail-out funds to help address the continent's fiscal woes, Wen added, without elaborating further on how the Asian power might be prepared to contribute.

China has made clear its growing concerns over the crisis in Europe, repeatedly urging EU leaders to get a grip on the situation, which the foreign ministry said this week had reached a "critical juncture".

European leaders last year approached China, which holds the world's largest foreign exchange reserves, to invest in a bail-out fund to rescue debt-stricken states.

EU leaders will discuss in March whether to boost the size of the 500 billion euro European Stability Mechanism (ESM), the permanent rescue fund due to begin operating in July.

Van Rompuy said he welcomed "the readiness of China to cooperate with the European Union in order to ensure the financial stability of the eurozone.

"We have not just navigated a difficult bend, but we have turned a corner," he added.

Leaders of the 17-nation eurozone and eight other EU nations agreed last month to create a new fiscal pact requiring signatories to put balanced budgets into law.

But Moody's this week questioned whether Europe was pulling together adequate resources to deal with the crisis as it chopped the debt ratings of Italy, Spain and Portugal.

The ratings agency also put France, Britain and Austria on warning, saying they were increasingly vulnerable to the eurozone crisis, which has brought Greece to the brink of bankruptcy and triggered violence in a number of cities.

Wen's comments came after the International Monetary Fund warned last week that an escalation of the EU debt crisis could slash China's economic growth in half this year.

Meanwhile, China and the EU stressed in the joint communique that the two sides should work towards resolving the MES issue "in a swift and comprehensive way."

Beijing has long demanded that the European Union accord China full market economy status, a technical designation that would remove certain restrictions to Chinese exports and investments in Europe.

EU leaders say the Asian giant has not yet met the necessary conditions, pointing out that most of China's largest companies are state-owned and their leaders appointed by the government.

Wen pledged that China would improve its laws and regulations in relation to foreign investment, enhance protection of intellectual property and improve its investment environment.

"China will continue to fully meet its World Trade Organization commitments," he said. "It will continue to expand market access."

The two sides also discussed the crisis in Syria, after China and Russia vetoed a UN Security Council resolution condemning the regime's bloody crackdown on protests, drawing international ire.

"China will absolutely not protect any party, including the government in Syria," Wen told reporters, as the international community warned of a humanitarian disaster in Syria.

Since the crackdown was launched less than a year ago, more than 6,000 people have been killed, monitors say.

The United States has called the rare double veto a "travesty", while one Syrian opposition group said it had handed President Bashar al-Assad's regime a "licence to kill".

Barroso and Van Rompuy will also hold talks with China's President Hu Jintao on Wednesday as part of the summit, which was originally due to take place in October, but had to be postponed due to the debt crisis.

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China mulls extending local govt loans: report
Shanghai (AFP) Feb 14, 2012 - China is considering allowing banks to roll over loans to local governments, giving them more time to repay massive debts from stimulus spending for the 2008 financial crisis, state media said Tuesday.

Local governments cannot borrow directly from banks, but in recent years they have set up financing vehicles to fund infrastructure and other projects, fuelling concerns about a potential explosion in bad loans.

The China Daily said the banking regulator was mulling "long-term" extensions of loans to local governments, and that a concrete policy could emerge as early as this month.

The China Banking Regulatory Commission could not be reached for comment Tuesday, but the Financial Times newspaper reported Monday that the central government had already ordered banks to roll over the loans to avoid defaults.

Last year, China's National Audit Office put the debt held by local governments at 10.7 trillion yuan ($1.7 trillion) at the end of 2010 -- or about 27 percent of China's 2010 gross domestic product (GDP).

Nearly half, or 4.46 trillion yuan, is scheduled for repayment this year, the China Daily said.

According to a separate report, China's banks had more than 9.0 trillion yuan of outstanding loans issued to local governments as of September last year, the Shanghai Securities News said Tuesday.

Analysts said China had previously rolled over such loans, but that the huge amount of money involved this time around was unsettling investors.

"Of course the loans are and will be rolled over," said Wang Tao, a Hong Kong-based economist for UBS.

"What is new and uncomfortable for investors is perhaps the size of new local debt accumulated during the last round of economic stimulus," she said in a research report on Tuesday.

The risk was some local governments used bank lending to finance unviable projects, which could eventually produce bad loans, Wang said.

China last year gave permission to four of its most developed cities and provinces to directly issue bonds, ending a long ban, to give cash-strapped local governments an alternative funding channel.


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China mulls extending local govt loans: report
Shanghai (AFP) Feb 14, 2012
China is considering allowing banks to roll over loans to local governments, giving them more time to repay massive debts from stimulus spending for the 2008 financial crisis, state media said Tuesday. Local governments cannot borrow directly from banks, but in recent years they have set up financing vehicles to fund infrastructure and other projects, fuelling concerns about a potential expl ... read more

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