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Chinese Premier Wen Jiabao and German Chancellor Angela Merkel stroll along a bank of the River Pearl in Guangzhou, Feb. 3, 2012. China is willing to help the euro zone, but like Germany, is taking a cautious stance.

Steffen Kugler/Reuters/Steffen Kugler/Reuters

From the FT's Lex blog

China's position on bailing out the euro zone is as ambivalent as, well, Germany's. That is one way of reading last week's meeting between Prime Minister Wen Jiabao and Chancellor Angela Merkel. Mr. Wen said Beijing was "investigating and evaluating ways in which it can get more deeply involved in solving the European debt problem." That line could have been scripted in Berlin, so accurately does it sum up Germany's position. Translation: Sure we are interested in helping the euro zone, but on our terms.

European leaders fret too much about whether, or how, China and other Asian nations and sovereign wealth funds might come to the euro zone's aid. They have already made big contributions. In 2011, Asia-based investors bought roughly 20 per cent of the €16-billion ($21-billion) of bonds issued by the European Financial Stability Facility. Governments, central banks and sovereigns – the bulk of them probably Asian – subscribed for between 32 per cent and 54 per cent.

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True, the proportion of both fell sharply in the EFSF's latest foray into the market, when it issued €3-billion of 3-year bonds last month to fund Ireland and Portugal. Asian investors bought 12 per cent of the issue, which coincided with the furor over France's imminent loss of its triple-A rating. (One pattern to emerge from Asian buying is that they prefer 5-year bonds.) But the slide in the EFSF's creditworthiness may shape future demand, so the euro zone must keep helping itself. The most salient fact about the last EFSF bond issue is that 76 per cent of it was bought by euro zone-based investors.

There are many claims on China's $3-trillion of foreign reserves. If it is liquid sovereign bonds Beijing is after, the choice is U.S. Treasuries or euro-denominated bonds, even if they are losing creditworthiness at the margin. There is no need to go cap in hand to Beijing. For the moment, China will keep buying the euro zone.

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