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Saving Europe: China's social cost

Tuesday, November 08, 2011 - 02:23

Nov. 8 - Europe has come knocking on China's door, begging for help in pulling the euro-zone out of its debt throes; but any help China gives may come at a social cost.

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Help save Europe! The French President calls out to China. Nicolas Sarkozy mincing no words: sink in some money in the bailout fund - and yank the euro-zone out of its debt crisis. China leaves them an open-ended response. JPMorgan Asset Management's Andrew Economos. SOUNDBITE (English) JPMORGAN ASSET MANAGEMENT'S HEAD OF SOVEREIGN & INSTITUTIONAL STRATEGY FOR ASIA ANDREW ECONOMOS SAYING: "China is more concerned about China right because ultimately it is a developing country." Silk Road Managing Director's Ben Simpfendorfer. SOUNDBITE (English) SILK ROAD MANAGING DIRECTOR BEN SIMPFENDORFER SAYING: "There is some interest in supporting Europe even though China's leadership has to be very cautious about domestic opinion." Domestic opinion - which two months ago - turned against Beijing - when S&P downgraded U-S credit ratings. Bloggers on local versions of Twitter in China went viral - denouncing the fact China had lost money on its investments in U-S Treasuries - public discontent Beijing would rather keep from happening again - and evolve into a repeat of the "Jasmine Revolution" that such social networks in China have spawned back in February 2011 at the height of the Arab uprisings in the Middle East. These protests - which spread to Beijing, Shanghai and other Mainland Chinese cities - have highlighted how social unrest - could upset the fragile balance of its political system. SOUNDBITE (English) SILK ROAD MANAGING DIRECTOR BEN SIMPFENDORFER SAYING: "A very important reason why it may not want to help is that it is still a relatively poor country. GDP per capita in Greece for instance is four times higher in China." SOUNDBITE (English) REUTERS CORRESPONDENT CATHY YANG SAYING: "That's why some think it may make more sense for China to keep a big part of its forex reserves -worth some 3-point-2 trillion dollars - within China. But Beijing will ultimately want to look for attractive yields to invest their money." SOUNDBITE (English) JPMORGAN ASSET MANAGEMENT'S HEAD OF SOVEREIGN & INSTITUTIONAL STRATEGY FOR ASIA ANDREW ECONOMOS SAYING: "So if the ECB comes back, backstop some of the debt, the yields are attractive, the Chinese will be a buyer like everybody else." So China may help - but it may do so not just for the political leverage it can get - but because investing in Europe is a viable proposition. Either way - Beijing may not win many friends back home - especially the millions of local Chinese who have yet to benefit from the China's growth story. Cathy Yang, Reuters.

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Saving Europe: China's social cost

Tuesday, November 08, 2011 - 02:23