China warns it cannot use reserves to save Europe

Vice Foreign Minister Fu Ying said at a forum that the argument that China should rescue Europe does not stand and that Europeans may have misunderstood how China manages its reserves.

She did not explicitly rule out using part of China's reserves for more targeted measures, but implied China was not going to ride in with a big chunk of its “savings” and bail out crisis-stricken Europe.

“We cannot use this money domestically to alleviate poverty,” Fu said. “We also can't take this money abroad for development support.”

Economists estimate that Beijing has already invested a fifth of its reserves in euro assets.

While the size of China's reserves is the largest in the world, analysts say two-thirds of that is locked up in dollar assets that cannot be sold, giving Beijing a more modest portion of about US$470 billion to invest each year.

Fu said China's reserves are akin to the country's savings and that the 1997 Asian financial crisis taught Beijing how important reserves are to the nation.

China's Foreign Ministry does not exert direct influence over how the country invests its foreign exchange reserves but can comment on that policy.

Fu said Beijing's refusal to use its reserves to ease Europe's debt woes does not count as a lack of support for the region, which is also China's biggest export market.

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