Chinese Prime Minister Wen Jiabao on Saturday offered his country's support for Europe and its common currency amid the eurozone's debt crisis. Wen said China was a long-term investor in the European sovereign debt market and has purchased a "not small" amount of euro-denominated bonds in the past years.
"China will consistently support Europe and the euro," Wen said after a meeting with Hungarian Prime Minister Viktor Orban. Wen is on a five-day tour that takes him to Hungary, Britain and Germany, just as Europe hammers out a plan to battle the eurozone debt crisis.
"Europe's debt crisis is expanding," Wen said. "Trust is more important than currency and gold and now, during the debt crisis, we again bring trust to Europe." "I have total trust in Europe's economic development," Wen said. Wen also said China would be willing to purchase Hungarian bonds the country does not yet use the euro and offered Hungary a loan of ¤1 billion ($1.4 billion).
For years Hungary has been striving to attract more Chinese investment and hopes China will make use of Hungary's infrastructure and the advantages of its geographical location in Central Europe as a hub for its expanding business ventures on the rest of continent.
Orban said Hungary and China signed a dozen agreements expanding their business and cultural ties, including plans for Chinese investments of $1 billion (¤704 million) in Hungary's chemicals industry. Wen will arrive in Britain later on Saturday and will end his European visit in Berlin, where he is expected to discuss Europe's debt crisis with German Chancellor Angela Merkel on Monday.
Wen, who is seen as the most pro-Europe leader in the Chinese Politburo, has voiced China's willingness to prop up the region's struggling economies, pledging to buy an unspecified amount of Greek government bonds during a visit to the debt-ridden country in October. A recent report by Standard Chartered Bank said that Beijing appeared to be buying fewer American assets a possible sign that the country was pushing more money into European bond purchases.
China is seeking to diversify its foreign investment and reduce its reliance on US bonds in the long-term, but it is likely not ready to take the risk of buying significant amounts of Greek or Portuguese bonds, said Marie Diron, head of European macro services at the UK-based consultancy Oxford Economics.
She warned that any Chinese help in buying European debt is probably limited to a small amount of financing and will be more effective as a morale-booster than a solution to Europe's structural problems. "I would expect some reassuring statements that would defuse some of the current tensions," Diron said. "But the problems are mainly eurozone's own problems. The bulk of financing should and can only come from Europe."
While in the UK, Wen will meet with Prime Minister David Cameron for an annual dialogue and oversee the signing of a series of governmental and business contracts. Wen is scheduled to visit the MG car plant in Birmingham, England, on Sunday. MG, owned by the Shanghai Automotive Industry Corporation, China's largest carmaker, designs cars in the UK but makes its car parts in China. The parts are assembled at the Birmingham plant The 68-year-old Wen is expected to retire next year amid a major Chinese leadership reshuffle.