Oxstones Investment Club™By Bloomberg News
Chinese Premier Wen Jiabao, facing calls to widen support for indebted European countries, signaled that developed nations should cut deficits and open markets rather than rely on China to bail out the world economy.
“Countries must first put their own houses in order,” Wen said today at the World Economic Forum in the Chinese city of Dalian. “Developed countries must take responsible fiscal and monetary policies. What is most important now is to prevent the further spread of the sovereign debt crisis in Europe.”
China can best contribute to the global economic recovery by ensuring steady growth at home, Wen said, calling on the European Union and U.S. to allow more Chinese investment in return. Stocks dropped in Asia as the comments damped optimism that China would help stabilize the euro region, after Italy this month followed Spain, Portugal and Greece in seeking investment from the world’s fastest-growing major economy.
“What he is basically saying is China wants to help, they want to invest, but we can’t help you take the proper measures to control the debt crisis, you’ve got to do that on your own,” said William Rhodes, a senior adviser to Citigroup Inc. who was at Wen’s speech.
The MSCI Asia Pacific Index gave up its early gain of as much as 0.3 percent to trade 1.8 percent lower at 5:19 p.m. in Hong Kong. Crude oil in New York was 1.2 percent down at $89.17 a barrel. Losses were capped after Chinese business magazine Caijing reported that China is still willing to buy bonds of crisis-hit nations, citing Zhang Xiaoqiang, a vice chairman of the National Development and Reform Commission.
‘Doomsday’ Scenario
Greek Prime Minister George Papandreou will hold a conference call with German Chancellor Angela Merkel and French President Nicolas Sarkozy today amid increasing speculation thatGreece will default. Spain is scheduled to sell debt tomorrow, after demand fell at an auction by Italy yesterday.
A default by Greece would be a “doomsday” scenario, Rhee Chang Yong, chief economist of the Asian Development Bank, said in Hong Kong today. “That’s the responsibility of the European and advanced economies’ policy makers not to let this happen, because if this happens, there would be huge turmoil in the global financial market.”
U.S. Treasury Secretary Timothy F. Geithner will press EU finance ministers to do more to combat the crisis when he meets with them this week, a euro-area official said. The official spoke on condition of anonymity because preparations for the meeting in Wroclaw, Poland, on Sept. 16 and 17 are confidential. It will be the first time Geithner has attended a session of Europe’s Economic and Financial Affairs Council, or Ecofin.
Sustainable Growth
The European crisis was “very, very damaging in the American economy last summer,” Geithner told Bloomberg Television on Sept. 9. “It’s very important to the world that Europeans do what they need to do so that the problems they’re facing don’t spread.”
Wen said he was confident that China would achieve “longer term, better quality” economic expansion, and that this would be the country’s contribution to sustainable global growth. The Chinese government would adopt policies to avoid volatility in its economy, he said.
In return, Wen called on the U.S. to maintain fiscal and financial stability and “ensure the interests of global investors.” China’s $3.2 trillion of foreign-exchange reserves make it the biggest holder of U.S. Treasuries.
The U.S. needs to lift export restrictions and, together with the EU, open markets to investment by Chinese companies, Wen said.
To read more please go here: http://www.bloomberg.com/news/2011-09-14/china-s-wen-says-world-must-cut-debt-and-deficits-increase-jobs.html
Tags: America, bail out, China, chinese companies, chinese investments, Doomsday, europe debt crisis, fiscal policy, Greece, monetary policy, Wen Jiabao