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China buying Italys debt?....(imagine my surprise)

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Panhead

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http://finance.yahoo.com/blogs/daily-ticker/china-offers-buy-italian-debt-price-152049480.html

inancial markets have seemingly stabilized in the past 36 hours in part on rumors that China will come to Europe's rescue and buy Italian debt. Overnight Wednesday, Chinese Premiere Wen Jiabao confirmed the speculation, with caveats.

"We have been concerned about the difficulties faced by the European economy for a long time and we have repeated our willingness to extend a helping hand and increase our investment," Wen said at the World Economic Forum's annual meeting in Dalian.

In exchange, Wen asked the Euorpean Union to recognize its status as a market economy under WTO rules prior to 2016 as currently scheduled. "If EU nations can demonstrate their sincerity several years earlier, it would reflect our friendship," Wen said.

The quid pro quo offer is consistent with what Kenneth Lieberthal director of the John L. Thornton China Center and a senior Fellow at the Brookings Institution expects from China, which in 2010 purchased $500 million of Spanish debt and pledged to buy Greek debt as well.

"When China sees a diplomatic opportunity they may put a little money behind it and reap some diplomatic benefits," Lieberthal says. "I wouldn't be surprised if they do buy some [Italian debt], I will be surprised if they buy a lot."

Given China's $3.2 trillion of reserves, there's legitimate reason to hope the People's Republic can become the world's new buyer of last resort. But "I don't think we're going to see the Chinese on a large scale moving money where the smart money people said you shouldn't go," Lieberthal says. "On the margins they'll make some political points and it's some value to them to diversify a little more vs. a little less in terms of dollar holdings."(See: China Unlikely to Rescue Italy or Europe: Strategist)

While the global economy is fixated on Europe and the U.S. right now, Lieberthal notes China is still keenly focused on its internal battle with inflation. In August, Chinese CPI rose 6.2%, down from a 37-year high of 6.5% in July but still above the government's official target of 4%.

As with hopes that China will come to Europe's rescue, Lieberthal says market speculation the People's Bank of China is done tightening will also prove mistaken.

"I think that if they err, it's likely to be on a little over-tightening," he says of China's central bank. "They really don't want to see inflation climb anything beyond what it is now. So they're going to be cautious" despite the global economic slowdown.

gente

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Looks like my ancestors on my Pops' side of the family will have to start takin' Mandarin lessons..hahaha

thx Pan

Panhead

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gente wrote:Looks like my ancestors on my Pops' side of the family will have to start takin' Mandarin lessons..hahaha

thx Pan

nah...China's just buying their debt just like them buying our debt (no need for Mandarin lessons yet)

bur what it does show is how bad things are for Greece and Italy....and Germany and France are balking at helping them much more effecting the Euro and it's value.

gente

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Wondering when this will come to a head..didn't ya say Greece sinks in in October ??

Panhead

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gente wrote:Wondering when this will come to a head..didn't ya say Greece sinks in in October ??

yep...read somewhere that Greece has enough money to it to October (mabye it was through October)....but these guys are on the ropes and Italy isn't far behind.
Something gotta happen quick or the Euro goes Boom!!!!!!!

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