China charms Europe, but Beijing has own agenda

China charms Europe, but Beijing has own agenda

LISBON, Portugal (AP) — When a nervous horse unseated its cavalry officer at a red-carpet event during Chinese President Hu Jintao's state visit to Portugal last year, the leader of the world's second-largest economy broke with protocol and walked over to the bruised guardsman.

"I hope you get well soon," Hu told him through an interpreter.

The public display of compassion was in keeping with China's European charm offensive in recent years. It has waved its checkbook at a growing number of financially ailing European countries — although the actual impact on Europe's debt-stricken countries has been limited so far, and aimed mainly at winning friends and business contracts.

Europe's frail economies are wobbling under the weight of their debts. Their urgent austerity measures are stunting growth and driving unemployment higher, and their citizens are clamoring for improvements. That has changed the complexion of European dealings with booming China.

Crisis-hit European countries are swooning over China's $3.2 trillion cash pile — the world's biggest foreign exchange reserves — even though many are angry about what they view as unfair Chinese practices.

"China is increasingly trying to diversify its foreign policy relationships ... trying to find the right ways to use its new-found influence, to gain from it," says Nicholas Consonery, an Asia analyst at Eurasia Group in Washington DC.

Join the dots, Beijing-watchers say, and China's strategy becomes clear: It wants to use its economic leverage to make friends who may be more forgiving in disputes over trade and human rights, and ensure doors are open for its goods and corporate investments in the European Union, its main export market.

Most immediately, many European countries are looking for a lifeline to extricate themselves from the continent's severe sovereign debt crisis, which threatens to collapse the continent's financial system.

In the latest example, Rome officials disclosed this week they held talks with China's sovereign wealth fund about buying debt-stressed Italy's bonds.

Before those talks, Beijing had vowed to buy the bonds of Greece and Portugal, which ended up needing international bailouts, and Spain and Hungary.

Though neither China nor EU countries disclose figures on Chinese bond purchases, analysts believe Beijing's repeated expressions of faith in the EU's finances are aimed principally at building goodwill and have not translated into large disbursements.

"Europeans have a tendency to pray for rain from China, but the rain is not necessarily coming," says Francois Godement, a Paris-based senior policy fellow at the European Council on Foreign Relations.

Experts reckon cautious Chinese leaders are hesitant about putting big money into jittery debt markets. Some leading Chinese economists have discouraged the investment as too risky, and analysts note Beijing has to pay attention to the needs of its own poor.

According to EU officials, China has invested in Europe's euro440 billion ($605 billion) bailout fund. But that fund carries a top AAA rating, meaning it is an extremely safe way for Beijing to help Europe without exposing itself much to the dangers of a default. The sums were never disclosed.

Rachel Shoemaker, an Asia expert at Executive Analysis in London, says the bond purchases — however modest — can help win approval for broader Chinese investments down the line, such as in trade and corporate and infrastructure investments.

"We assess that China's rhetoric is likely to exceed its actual support, with China likely to focus on commercial gains and thus to negotiate bilateral deals that essentially result in investment opportunities in return for bond purchases," Shoemaker said in a written reply to AP questions.

She cites Greece as an example. As China promised to acquire that country's bonds, state transport giant China Ocean Shipping Co. snared a $1 billion concession deal in 2009 for the country's largest container-terminal port near Athens. That gives COSCO's growing port management business a foothold in Europe and positions it to prosper as Chinese trade with the Balkans and Central Europe grows. China also pledged to help double the trade volume with Greece to nearly euro6 billion by 2015.

It's a similar story across Europe, with Chinese pledges of bond purchases coming simultaneously with announcements of major investments in the continent's corporations and infrastructures.

Chinese Premier Wen Jiabao and Italian Premier Silvio Berlusconi last year spoke optimistically of doubling bilateral trade to $100 billion within five years. In one of the deals signed in their presence, Internet service provider Tiscali SpA and Zte, a Chinese maker of telecommunications equipment, made a deal for development of ultra-wideband in Italy.

One of the conditions of China's purchase of Spanish bonds in January 2011, analysts say, was the sale to Sinopec of around $7 billion worth of Brazilian oil assets held by Spanish energy company Repsol. That deal gave birth to one of Latin America's largest energy companies.

On his Portugal trip, the Chinese president signed cooperation agreements which sought to double trade between the two countries within five years. Chinese and Portuguese companies signed deals in areas covering energy production, information technology, telecommunications, tourism, banking, port infrastructure, and agriculture.

China's European push came after its expansion into Africa where it has invested billions, mostly in gaining access to raw materials.

"It's clear that China has been successful in pushing emerging market investments and it increasingly wants to diversify into the developed world," said Consonery of Eurasia Group.

Even so, Beijing knows that in the U.S. and Europe "the political hurdles are higher" than in Africa, Consonery said.

Europe, like the U.S., is fighting Beijing over trade barriers. Europe is vexed by aspects such as investment rules and copyright violations in China. The Chinese, meanwhile, are pressing the EU to grant China market economy status that would relax remaining trade obstacles.

Human rights issues are another sore point.

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This goes along with information already being reported about Chinas economy, specifiically its trade imbalances, currency manipulation and the hiding of debt. Apparently China is after more than just European debt. They are now using the purchase of debt in order to force concessions out of European businesses that place Chinese businesses into the category of preferential treatment.

The buying of Spanish debt apparently carried with it more than what was reported -

One of the conditions of China's purchase of Spanish bonds in January 2011, analysts say, was the sale to Sinopec of around $7 billion worth of Brazilian oil assets held by Spanish energy company Repsol.

As I have been saying, China is manipulating its currency to such an extent they are now doing to Europe the same thing they have done to the US.

Purposely keep their currency undervalued, which creates trade surplus in Chinas favor, who in turn uses the imbalance to purchase up debt and then uses that leverage to gain advantages for Chinese business..

Europe was not as verbal as the US was regarding Chinese practices .

Apparently that is now changing.


* - ATS - China states price for Italian rescue - China has called for major strategic concessions from Europe

* - ATS - China's Debt Problem Worse than Portugal

* - ATS - China Consolidates Grip on Rare Earths

* - ATS - China warns India and Vietnam : Do not do oil exploration in the South China Sea

China has a nice scam going on... If its not dealt with, China will essentially corner the entire global market in key areas, accomplishing domination through resource control instead of military might.

Thoughts?

reply to post by Xcathdra

China has a nice scam going on... If its not dealt with, China will essentially corner the entire global market in key areas, accomplishing domination through resource control instead of military might.

But americas and NATO domination is through military might,covert wars, and manufactured revolutions by installing puppet pro western selected leaders in the countries such has the happenings in libya and Sryia where the Sryiauans are burning Iranian,Russian,chinese flags but wont burn the american flags?


that doesnt small right.

As I have been saying, China is manipulating its currency to such an extent they are now doing to Europe the same thing they have done to the US.

America has also been manipulating the dollar just so you know that.

The different is when china doing it, it's more obvious and transparant, and not that lethal compares to that of western powers. The analogy is if china behaves like a mugger, western powers behave like a serial killer.

Originally posted by Jazzyguy
The different is when china doing it, it's more obvious and transparant, and not that lethal compares to that of western powers. The analogy is if china behaves like a mugger, western powers behave like a serial killer.

Actually no, its not transparent. China has been caught time and again manipulating their currency to keep it under valued. They have been caught hiding base debt and under reporting it to international crediting agencies, as well as the WTO.

They are being anything but transparent....

Originally posted by Agent_USA_Supporter
...............snip

Which is not in dispute by anyone, and is not a focus of this thread.

China's cooking the books like mad, anyhow. And it's sort of dumb. Screwing over Europe and North America is really a sure-fire way to doom themselves. Of course, the people controlling the policies in China have a way out before the fire gets too hot.

Originally posted by AnIntellectualRedneck
China's cooking the books like mad, anyhow. And it's sort of dumb. Screwing over Europe and North America is really a sure-fire way to doom themselves. Of course, the people controlling the policies in China have a way out before the fire gets too hot.

Thats the one part I have not been able to figure out.

Why china would continue down this road knowing what the end of the road looks like. Anyone else find it odd that while they are lecturing the US and EU on debt, they are still buying it up like crazy? Why lecture and warn, only to ignore your very own warnings?

Its like china is trying to position itself as the center. Control as many resources as possible, be invokved in as many economies as possible, make sure thos economies are reliant upon Chinese manufacturing and wait?

Economic collapse? Strategic control of rsoufce bases across the globe, from the mundance to the exotic...

Economic war?

Something is missing fromt he equation, becuase the way it is now doesnt really make sense.

reply to post by Xcathdra


Found an interesting video from the website howstuffworks.com that touches on this topic.