China’s leaders cautious on EU rescue plan

BEIJING — When President Hu Jintao travels this week to the glamorous French resort of Cannes for a summit of the world’s 20 leading industrialized and developed nations, it should be China’s moment to swagger on the global stage.

European leaders have agreed to a $1.4 trillion rescue fund to stop the debt crisis in Greece from bleeding into other shaky euro-zone economies — and they are looking to China to foot part of the bill. And while the United States and Europe come to the summit grappling with problems of huge debt and anemic growth, China’s problems are the stuff of envy: what to do with a foreign reserve stockpile of $3.2 trillion and how to slow down growth to keep the its economy from overheating.

Video

CBS News business and economics correspondent Rebecca Jarvis talks about the ripple effect caused by concerns over the deal between Europe and Greece.

Gallery

Worst-case scenarios: What would happen if Greece, Spain or Italy were to default? Deutsche Bank, RBS and other investment research firms have released reports detailing the domino effect of a collapse of a single country in the euro zone. Here’s the doomsday scenario.

More on this Story

• Merkel caught between upsetting voters or Europe
• Merkel faces growing criticism for euro approach
• After a narrow trust vote win, Papandreou eyes coalition
• IMF seeks help for Europe in Latin America

View all Items in this Story

• Greek referendum call upends euro-plans
• Greek leader loses key supporters over referendum
• World leaders to confer over referendum call
• On Greek debt, lessons from South America
• Greece giving voice to euro-skepticism
• Debt plan for Greece to fall hardest on locals
• European markets plunge on proposed Greek bailout vote
• Rescue plan hits banks, pension system hardest
• More headlines from around the world
• China’s leaders cautious on EU rescue plan
• Europe has a president, but no leader
• Economist Papademos to lead Greece’s unity government
• Debt crisis feels distant from Europe’s small towns

Yet far from swagger, China’s leaders appear to be approaching this seminal moment with caution and outright concern.

China’s leaders will contribute to Europe’s bailout fund, economists and other analysts here said. But they are doing so mainly because they have little choice, since a continued economic crisis in Europe is bad for China, too.

“It’s not only about saving Europe, but the U.S. and the whole world, including China itself,” said Yi Xianrong, director at the financial research center of the Chinese Academy of Social Sciences. “A stable global financial system is also in China’s own interest.”

Patrick Chovanec, who teaches at Tsinghua University’s school of economics and management, agreed. “It may seem like an all-powerful creditor and weak, supplicant debtors,” he said. “But the debtor countries and the surplus country are locked in a mutual embrace that is problematic for both of them.”

Chovanec compared the situation to that of a small-town shopkeeper who has to continue letting his customers build up credit, for fear that if he doesn’t, they will stop coming and he will be forced out of business.

China’s ability to assist Europe — and to bankroll the U.S. debt through the purchase of Treasury securities — comes from its huge surpluses. The European Union, China’s largest export market, has a trade deficit with China of about $230 billion.

China’s leaders also are moving cautiously because they are acutely aware that Chinese public opinion is firmly against helping bail Europe out of its debt crisis. Comments on the hugely popular
Twitter-like microblogging sites, called weibo, offer a window into the popular sentiment.

For China’s netizens, Europeans enjoy a rich lifestyle with lavish early-retirement packages and several weeks of paid vacation each year, while the majority of Chinese can barely earn enough to make a living. So why should China’s government be using its hefty reserves — the people’s money — to help Europe instead of improving living conditions at home?

“The root of the heavy European debt is excessive welfare,” wrote one weibo user under the name “Turbulence and Change.” “They have a large number of lazy people. Even if China doesn’t offer a hand, Europeans still won’t live worse than Chinese. Furthermore, no European will die of hunger.”