China Daily reports the following on the response of China to the current EU crisis:
Premier Wen Jiabao told Spanish Prime Minister Jose Luis Rodriguez Zapatero on Monday that China supports action to help Greece overcome its sovereign debt crisis. Spain currently holds the rotating presidency of the EU.
In a telephone conversation with Zapatero, Wen urged countries to coordinate economic policymaking, reform the international financial governance structure, maintain stability of currencies and prevent protectionism.
But it is too early to suggest the European situation has stabilized, said Yu Yongding, head of the China Society of World Economics.
"The Greek crisis fully exposed the weakness of the global economic recovery," Yu, a former member of the central bank's monetary policy committee, told China Daily. "It is hard to predict what will happen next.
The euro will probably remain weak, Yu said, while the dollar will strengthen.
It will pose a challenge for China's policymakers, who want to diversify the country's overseas financial portfolio," he said.
China's tightening policy "should stay"
China has spent the bulk of its foreign exchange reserves on dollar-denominated assets, such as US treasury bonds. It has been pondering diversifying the structure of investment.
"But now it is clear that the euro also has risks," Yu said. "It would complicate China's policymaking."
China's exports are set to suffer, Yu said, since the crisis would be a drag on the growth of Europe, China's largest trade partner. "Growth is no longer the top priority for crisis-hit countries; they have to first repay their debt and convince investors they are capable of doing that.
The impact on China's exports, however, could be limited, said Zhang at the State Council's Development Research Center.
"The weakened euro will affect trade settled in euros, but the majority of China's trade with European countries is settled in US dollars," he said, adding that China's previously announced export target of 10 percent year-on-year growth for this year should not necessarily be changed.
One outcome of the European crisis is that China is facing less pressure for the yuan's revaluation as the US dollar is rising. But the dollar's rise could damage US exports, which US President Barack Obama wants to double in five years. "Therefore, the US could press harder for the yuan's appreciation to benefit its export sector," Yu said.
China will "improve the yuan's exchange-rate formation mechanism", but the yuan would remain "basically stable", the People's Bank of China said in a quarterly report on Monday.
Premier Wen Jiabao told Spanish Prime Minister Jose Luis Rodriguez Zapatero on Monday that China supports action to help Greece overcome its sovereign debt crisis. Spain currently holds the rotating presidency of the EU.
In a telephone conversation with Zapatero, Wen urged countries to coordinate economic policymaking, reform the international financial governance structure, maintain stability of currencies and prevent protectionism.
But it is too early to suggest the European situation has stabilized, said Yu Yongding, head of the China Society of World Economics.
"The Greek crisis fully exposed the weakness of the global economic recovery," Yu, a former member of the central bank's monetary policy committee, told China Daily. "It is hard to predict what will happen next.
The euro will probably remain weak, Yu said, while the dollar will strengthen.
It will pose a challenge for China's policymakers, who want to diversify the country's overseas financial portfolio," he said.
China's tightening policy "should stay"
China has spent the bulk of its foreign exchange reserves on dollar-denominated assets, such as US treasury bonds. It has been pondering diversifying the structure of investment.
"But now it is clear that the euro also has risks," Yu said. "It would complicate China's policymaking."
China's exports are set to suffer, Yu said, since the crisis would be a drag on the growth of Europe, China's largest trade partner. "Growth is no longer the top priority for crisis-hit countries; they have to first repay their debt and convince investors they are capable of doing that.
The impact on China's exports, however, could be limited, said Zhang at the State Council's Development Research Center.
"The weakened euro will affect trade settled in euros, but the majority of China's trade with European countries is settled in US dollars," he said, adding that China's previously announced export target of 10 percent year-on-year growth for this year should not necessarily be changed.
One outcome of the European crisis is that China is facing less pressure for the yuan's revaluation as the US dollar is rising. But the dollar's rise could damage US exports, which US President Barack Obama wants to double in five years. "Therefore, the US could press harder for the yuan's appreciation to benefit its export sector," Yu said.
China will "improve the yuan's exchange-rate formation mechanism", but the yuan would remain "basically stable", the People's Bank of China said in a quarterly report on Monday.
This may be good news for the US as it requires money for its debt but it creates a potentially long term instability which may come back to the Chinese market and then return to the US.
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