Why China should not bail out Europe – Shaun Rein

Europe is more than ever looking at China as a way out of its financial misery. But business analyst Shaun Rein argues in CNBC that buying Italian bonds is not in the interest of China, or the world.

Shaun Rein:

Since the crisis started, far too many politicians have looked for easy solutions like lower interest rates rather than restructuring economies to rebuild confidence and create job opportunities. Buying Italian bonds will not save Europe. It will only avert a crisis until a few months down the line when fears about Spain or Portugal hit the world.

Even though Prime Minister Wen Jiabao said China would be a friend to Europe, he did not specifically mention what his nation would do. Wen’s options are limited because of raging inflation that hit 6.2 percent in August, rising local government debt and non-performing loans. Domestic pressure is also pushing the government to be cautious in buying bonds. The Chinese people don’t want to see the nation’s reserves drop in value if the Euro falls just as China’s U.S. dollar holdings have lost value…

China is being a responsible global stakeholder by stepping in to calm markets and ensure the fiscal viability of its own nation. It is taking care of its internal interests and helping where it can globally. But the Chinese know that buying bonds is not a long-term solution. Western Europe and America need to focus on reforming their economies to produce items the Chinese want. They need to build consumer confidence through job creation and stop dreaming that a Chinese bailout will work.

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Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.