This is particularly funny to me. It has long been rumored China was willing to provide as much as $3.2 Trillion in foreign exchange reserves to bail out the Eurozone. I would have expected the Chinese to focus their demands on austerity programs. However, what they are really after is:
- Greater status at the World Trade Organization
- Removal of an arms embargo placed after Tiananman Square
- Greater influence in the IMF- International Monetary Fund
When it came right down to it- led by Germany, the European delegation simply left rather than negotiate, stating its not worth it to allow a Communist Country to have too much influence of EU Members. The Chinese have a lot at stake in Europe, so they don’t have any great leverage in the process. The EU is China’s largest export market, and a full 25% of China’s foreign exchange reserves are in European denominated investments. If Europe goes down, China will lose very big as well. While all this was going on, stocks in China continued their rebound, suggesting the Chinese markets are really starting to buy into the “Soft Landing” scenario. In Monday trading, the Shanghai A shares were up 1.92%, and the B shares 2.02%- 2% moves to the upside are nothing to sneeze at.