Ironic EU Begging Expedition to China

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Europe returned from its begging expedition to Beijing empty-handed. Well, they called it a summit, but it was an unmitigated begging expedition, one more in a series. Jose Manuel Barroso, President of the EU Commission, and Herman Van Rompuy, President of EU Council, were talking to Premier Wen Jiabao, trying to lure China into plowing part of its hard-earned foreign exchange trillions into the European bailout fund, the EFSF. And they made that dreadfully convoluted and opaque creature smell like a rose, expounding with habitual European finesse and nuance on its guarantees and loss mitigation provisions backed by countries like Italy and Spain that can barely keep their nose above water.

Even a small amount would have been something. Anything really. Just so that they wouldn’t have to fly home empty-handed. And once they got their foot in the door, surely, there’d be ways and means to get the other foot in as well. But rather than kick out the conniving beggars, Wen smiled and declared soothingly, as always, that Europe was an important partner, and that China and the EU would work together to solve the debt crisis.

But where’s the money? It appears that buying sovereign bonds of debt-sinner countries that are veering towards insolvency and need of an ever larger flow of cheap money to pay off old investors and teetering banks just isn’t a lot of fun.

China has its own problems on the horizon—and some, like a popping real estate bubble, on its doorstep. No one knows where this will end up, but real estate won’t experience a soft landing, nor will the construction business. Foreign direct investment is down, well just a smidgen, but the Ministry of Commerce warned that the outlook for FDI was outright “grim.” And then it turned out that China reduced its holdings of US Treasuries, down to $1.1 trillion, the lowest since June 2010.

The Chinese people, some of whom had bought apartments that dropped 30% in value since, aren’t particularly eager to help a distant continent, though, judging from the masses of Chinese tourists in Europe, they’re doing quite a bit to help out. Just not for free. Perhaps they remember the past when the West lectured China on a laundry list of issues, from capitalism to human rights and democracy, and when French President Nicolas Sarkozy got into a pissing match with China just before the Beijing Olympics. Anti-Chinese sentiment ran high in France at the time. But that was 2008. Now, the Eurozone is steeped in a debt crisis, and even France’s most coddled industry—fine wines—got slapped in the face. By China.

Barroso and Van Rompuy assured the world that they’d talked to Wen about other issues as well, the usual crowd pleasers: better market access for European companies and better protection of intellectual property. Even Syria came up. They’re trying to do what US Presidents and Secretaries of the Treasury have done for years: regular begging expeditions to Beijing, dressed up as diplomatic discussions. But China is less interested in crappy sovereign bonds than in productive assets that offer strategic advantages, certain technologies, and access to markets. It’s a government policy. State-owned enterprises, the sovereign wealth fund CIC, and some private companies are actively pursuing it.

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