Last week, when there were rumours flying that China might swoop in and buy Italian bonds to help prop up the euro, Premier Wen Jiabao made it clear what they would want in exchange for saving Europe– recognition as a full-market economy (one where prices are determined not by the government, but by supply and demand).
All of the sudden, though, it seems like the government is doubling down.
Here’s what an official had to say about helping out Europe today.
Via Shanghai Daily:
“China has set no preconditions for offering help to others. We only hope that we can gain respect when treating others sincerely,” Shen Danyang, spokesperson for (the Ministry of Commerce), said during a news briefing.
Shen went on to say he was disappointed that China was not to be recognised as a full market economy, but that China saw its economic status and European aid as two separate issues.
The question here is why. The crises isn’t over and Europe could probably still use China to save the day, so why are they giving up their leverage? The first clue is that the statement above was made by an official in the Ministry of Commerce. That means we’re talking trade.
The second clue comes to us from the same official in the Jakarta Post:
“As the crisis within the EU intensifies … bilateral trade friction may be increased, which is detrimental to China-EU economic and trade relations,” Shen said.. “Of course, we believe there’s opportunity in the crisis. Everyone can work hard together to turn the crisis into an opportunity.”
There it is, trade. China was just hit with an anti-dumping investigation from Australia over steel pipes, and the European Union has already imposed a duty on Chinese ceramic tiled of between 26.3% and 69.7%. Earlier this year, the EU imposed a 4% to 12% duty on Chinese copper plates.
The moral here is that just because China has cash, doesn’t mean they have no fear. And with wages on the rise, Western nations may have more leverage than we think.
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