China Extends Help to Tackle Euro Crisis

The EU is China’s biggest export market: Trade for 2010 is up by more than 30 percent over 2009 levels. China, not wanting its huge customer base to struggle, purchases European bonds and assists in financial stabilization. “China classifies the composition of its foreign exchange reserves as a state secret and European and US officials say it is often very hard to determine the true scale of Chinese purchases of sovereign debt and other global assets,” writes Jamil Anderlini for the Financial Times. Euro investments allow China to diversify from purchasing US debt. With huge reserves and a trade surplus, China’s investment allocations and timing of purchases are influential in the debt markets. China continues to seek “market economy” status from the EU, suggesting that the nation allocates resources based on market forces of supply and demand without government influence – which would thus ease some World Trade Organization restrictions in trade disputes. – YaleGlobal