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Updated Friday, October 28, 2011 0:08 am TWN, AP

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Europe looks to China as potential investor

BEIJING -- As Europe's leaders struggle toward a solution to its debt crisis, hopes are growing that cash-rich China will take a major role in a rescue — expectations that are likely to be dashed.

On Friday, the chief executive of Europe's bailout fund visits Beijing to talk to potential investors. Beijing has expressed sympathy for the 27-nation European Union, its biggest trading partner, but has yet to commit any cash.

Joining in a bailout could help Beijing in its campaign to join the top ranks of governments that manage the global economy — a leadership role that many around the world have been urging China to take.

So far, Beijing has promised to help only by continuing business as usual, trading with Europe and stockpiling some of China's multibillion-dollar trade surpluses in the safest European government bonds.

Still, getting directly involved would put Chinese leaders in a position that is fraught with political risk — spending public funds to bail out European countries that despite their debt crisis are still far richer than China per person.

Managers of China's sovereign wealth fund, a potential investor, have tried to maintain an image as careful financial guardians after they faced criticism when early investments abroad failed to perform well.

European leaders are looking for investors outside the 17 nations that use the euro common currency, including sovereign wealth funds, for a fund to backstop the main bailout fund, the European Financial Stability Facility (EFSF).

That is part of a complex plan under development to have the EFSF act as an insurer for bonds issued by weaker governments such as Italy and Spain, making them more attractive to investors.

The head of the EFSF, Klaus Regling, is due to explain the insurance scheme during his visit Friday to Beijing.

Still, China's robust economy and US$3.2 trillion in foreign reserves have fueled hopes in weaker economies that Beijing might emerge as a last-minute alternative to European aid and austerity measures that have fueled protests.

Asked on Thursday whether China would contribute to a bailout fund, foreign ministry spokeswoman Jiang Yu said Beijing welcomed European leaders' agreement to shore up banks and reduce Greece's debts. But she gave no indication whether China would contribute.

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