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Chinese Consumer Stimulus 'Good for Europe'

Industry News 03:04:50PM Sep 07, 2011 Source:SMM

LONDON (China Daily) - European countries struggling from the debt crisis could benefit from China's consumption stimulus, which would help European exporters, analysts said.

"The best thing China could do is to stimulate its own consumerism - several European countries could benefit from this stimulus - because then you're getting real growth and economies would cope with debt better," Vanessa Rossi, associate fellow in economics at London-based Chatham House, told China Daily.

China is the second-largest buyer of EU exports. China's trade and investment figures with the European Union continue to rise year-on-year.

"I think the most support China has given has been through its growing demand for imports, which has greatly increased the exports of Europe in the last year (and) provided a stimulus for the European economy that helps to propel growth here," Rossi noted.

China has reiterated its confidence in the euro since the debt crisis began and has helped troubled countries such as Greece, Spain, Portugal and Italy through bond purchases.

China has expressed support for Europe on various occasions. A phone call between Chinese Premier Wen Jiabao and European Commission chief Jose Manuel Barroso on Sept 2 was aimed at reassuring markets that China will continue to support the ailing eurozone.

In terms of the impact of the debt crisis on China, London-based Exclusive Analysis Ltd, a specialist intelligence company that forecasts commercially relevant political and violent risks worldwide, said in a report that "despite increased criticism of EU deficits and US debt, the current crisis is unlikely to have a significant effect on China's investment policies in these economies".

However, Rossi said, the very fact that this has been going on for a long time without a clear solution and a lack of bonds has meant that many investors, not just China, feel confused about what Europe would like them to do.

"They may also be concerned about a general risk to the world financial system if there continues to be chaotic markets in Europe," Rossi added.

Duncan Freeman, a research fellow at the Brussels Institute of Contemporary China Studies, noted that there are a number of risks for China. The first is that the crisis, and the policies adopted in response, will result in a slowdown of Chinese exports to Europe.

Statistics from the Chinese Ministry of Commerce show that the EU is China's biggest export market, accounting for about one-sixth of China's total trade.

Freeman said the second risk is that the EU will become an increasingly unattractive and risky location for Chinese investment.

"The third, more broadly, is that the crisis will undermine the stability and viability of the euro and the EU itself, which will create risks in the bilateral EU-China relationship, and also for the position of the EU in China's global policy," Freeman added.

"The euro debt crisis was created in the EU and can only be resolved within the EU," he said.
 

Key Words:  debt crisis 

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Chinese Consumer Stimulus 'Good for Europe'

Industry News 03:04:50PM Sep 07, 2011 Source:SMM

LONDON (China Daily) - European countries struggling from the debt crisis could benefit from China's consumption stimulus, which would help European exporters, analysts said.

"The best thing China could do is to stimulate its own consumerism - several European countries could benefit from this stimulus - because then you're getting real growth and economies would cope with debt better," Vanessa Rossi, associate fellow in economics at London-based Chatham House, told China Daily.

China is the second-largest buyer of EU exports. China's trade and investment figures with the European Union continue to rise year-on-year.

"I think the most support China has given has been through its growing demand for imports, which has greatly increased the exports of Europe in the last year (and) provided a stimulus for the European economy that helps to propel growth here," Rossi noted.

China has reiterated its confidence in the euro since the debt crisis began and has helped troubled countries such as Greece, Spain, Portugal and Italy through bond purchases.

China has expressed support for Europe on various occasions. A phone call between Chinese Premier Wen Jiabao and European Commission chief Jose Manuel Barroso on Sept 2 was aimed at reassuring markets that China will continue to support the ailing eurozone.

In terms of the impact of the debt crisis on China, London-based Exclusive Analysis Ltd, a specialist intelligence company that forecasts commercially relevant political and violent risks worldwide, said in a report that "despite increased criticism of EU deficits and US debt, the current crisis is unlikely to have a significant effect on China's investment policies in these economies".

However, Rossi said, the very fact that this has been going on for a long time without a clear solution and a lack of bonds has meant that many investors, not just China, feel confused about what Europe would like them to do.

"They may also be concerned about a general risk to the world financial system if there continues to be chaotic markets in Europe," Rossi added.

Duncan Freeman, a research fellow at the Brussels Institute of Contemporary China Studies, noted that there are a number of risks for China. The first is that the crisis, and the policies adopted in response, will result in a slowdown of Chinese exports to Europe.

Statistics from the Chinese Ministry of Commerce show that the EU is China's biggest export market, accounting for about one-sixth of China's total trade.

Freeman said the second risk is that the EU will become an increasingly unattractive and risky location for Chinese investment.

"The third, more broadly, is that the crisis will undermine the stability and viability of the euro and the EU itself, which will create risks in the bilateral EU-China relationship, and also for the position of the EU in China's global policy," Freeman added.

"The euro debt crisis was created in the EU and can only be resolved within the EU," he said.
 

Key Words:  debt crisis