China supports Europe by pledging to buy bonds

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fishball

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http://www.bloomberg.com/news/2011-...wen-extends-support-to-european-finances.html

China pledged to buy Hungarian government bonds and said it will "consistently" support the euro as Europe battles to fight its way out of a sovereign debt crisis.

China will buy a "certain amount" of Hungarian government bonds and remains a "long-term investor" in European debt markets, Chinese Premier Wen Jiabao said in Budapest today. This afternoon, Wen travels to the U.K. and then on to Germany on his three-country European tour.

"China is a long term investor in Europe's sovereign debt market," Wen said in translated comments at a press conference with Hungarian Prime Minister Viktor Orban. "In recent years we have increased by quite a big margin our holdings of government bonds. We will consistently continue to support Europe and the euro."
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Tin foil hat mode: Conquering the world one country at a time through economic slavery? :P

Interesting to see that China wants the Euro to stay (for now), perhaps this will delay the collapse of the Euro and the prices of our PMs will stabilize for a while until the Bernanke gets out of hand again?

I guess the whole point of Wen coming out and saying he supports the Euro debt markets is so that China's exports grow strong once again so that China can grow as well.

Perhaps Gold price will really drop below the support levels and hit sub $1400 next month with the end of QE2 and the euro debt crisis temporarily 'solved'.
 
Once the western world runs on Chinese saved money there will be not much point to have USD as the world reserve currency.
 
Reminds me of the old adage, "Throwing good money after bad".

They have a Trillion in US Treasury Bonds, and will follow that with a Trillion in ECB Bonds????

NEITHER will end up with any value.



OC
 
Wen Jiabao said:
China is a long term investor in Europe's sovereign debt market
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Translation: China desperately needs to diversify away from the USD.
 
I am sure the Chinese know the position they are in, but they have NIL hope of off-loading the worthless Bonds into the current market. It would collapse, and their paper 'loss' would turn into a real loss overnight.

They seem to be going into Gold and Silver, and anything else of value they can buy around the world. But Bonds are not IT! Least of all Euro Bonds etc, they are as worthless as a US Treasury Bond. All they can do is hope to put off the evil day a bit longer.

My bet is they will end up losing most of it.


OC
 
If USA collapse so it will EU and opposite, and China will follow,so China intervention is just buying time, just dont know for what. How much must be China monetary mass to replace USD as reserve currency.
 
At the moment, from the government side, china needs to bail out europe or U.S or both. By bailing them out it also provides them the means to "kindly" keep their currency low. Without the currency dumping, yen should be sky high now. The only fiat with the backing of a very strong economy.

These 2 zones are their biggest consumers. Without demand from these 2 zones, what is china going to fuel their growth with?

So, at the moment china is acting out of self preservation.

The next few years will be interesting, because after Greece, there is still ireland, spain and portugal. Eurozone is not booming anymore, neither is America.

If china focuses on their domestic growth, that will only mean more inflation and higher wage. It also means their current trade surplus in relation to everyone else can reverse into trade deficit.

A very confusing time ahead. If anyone can provide any sort of guidance it will be much appreciated.
 
jpanggy,


I think your reasoning is correct, and the overall outlook around the world is very glum. The world's economies are so inter-dependent now because of this 'globalisation' idea that if one goes down the gurgler then it will drag the others down too. That is especially so with the USA/EU/PRC 'Troika'.

The sea of red ink is simply too deep, and rescue is impossible.



OC
 
As well as preserving their major markets by propping up the euro-zone and the US, its also an exercise in building political capital and good will.

I have no doubt that China wants the top spot in world 'politics' that is currently occupied by the US. What better way to get support than to buy it by saving peoples arses with amounts of money that are in all likelihood quite trivial for the Chinese regime.
 
The US$3 Trillion that China has in foreign reserves would not go within a bull's roar of solving the world's debt problems.

It may well help to delay the disaster we face, but that is about all., and the Bonds that they buy will probably end up being worthless.

I am sure that China will gain some good will, and in the meantime get assets that they can use in 20 years, such as land and foreign companies.


OC
 
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