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In declining to now discuss the possibility of buying bonds to bail out Europe, China is being reasonable, the chief of the Organization for Economic Cooperation and Development said on Thursday.
Angel Gurria, secretary-general of the Paris-based organization, a forum for the discussion of economic policies, said China should make decisions in the same way that businessmen and investors would.
“I must say that it is investment and not about aid or support or some political gesture,” Gurria said.
He said China must consider safety and profitability and it is therefore understandable that it would make the decisions it has made.
Gurria made the comments after Zhu Guangyao, the Chinese vice-minister of finance, told reporters in Cannes, France, that it is too early for China to talk about buying bonds from the European Financial Stability Facility. To prevent the Greek debt crisis from infecting other countries, a current plan would have that fund go from being able to lend out 440 billion euros ($607.4 billion) to being able to lend out 1 trillion euros.
Even so, Zhu did not rule out the possibility that China would buy bonds from the fund once it decides such an investment would be both safe and profitable.
Gurria said China holds a massive sum of foreign reserves and will make decisions according to how attractive it sees an investment as being.
“But eventually, this is a business decision, though when it is done, it has political meaning,” he said.
Gurria said China, in diversifying its holdings of foreign reserves, will compare the returns it stands to make from one sort of investment with those from another.
Gurria also said China should play a “systemic, vital and even central” role in helping the international community overcome its difficulties.
“The deep interdependence of the world economy and China’s systemic role means that whatever China does is of great importance to the world and also to itself,” he said.
Gurria said the greatest difficulty the world now faces comes in deciding how to ensure the short-term measures announced by the European Union are fully and decisively adopted.
Beyond increasing the strength of the financial stability facility, the European Union has also decided to recapitalize European banks and reduce by half the value of the Greek debt held by private investors.
“If we take decisive actions, we can avoid the scenario of recession again,” Gurria said. – China Daily