IMF chief holds talks in China amid eurozone turmoil

Being still France’s Finance Minister, Christine Lagarde, talks with China Central Bank Governor Zhou Xiaochuan for the opening session of the G20 Finance summit at Bercy Finance Ministry in Paris, on February 19, 2011

Πηγή: rnw
By ANP/AFP
Nov 10 2011

International Monetary Fund chief Christine Lagarde held talks in Beijing Thursday against a backdrop of worsening economic turmoil in Europe that has rattled financial markets around the world.

Lagarde, who is on a two-day visit to China, has warned that Asian economies are not immune to the crisis that has engulfed the eurozone, saying the world risked a "downward spiral" if it did not pull together to tackle the crisis.

Details of the IMF chief's visit were being kept under wraps, but it is all but certain to focus on the crisis in Europe, whose leaders have already called on China to contribute to a fund set up to support troubled eurozone economies.

She held talks with the head of China's central bank on Wednesday, and the foreign ministry has said she will also meet Chinese leaders, without giving further details.

Asian stock markets slumped on Thursday after Wall Street suffered a pummelling, as Italy became the latest European country to suffer a huge surge in borrowing costs.

"If we do not act together, the economy around the world runs the risk of a downward spiral of uncertainty, financial instability," Lagarde warned in a speech on Wednesday.

China has the world's largest foreign exchange reserves at $3.2 trillion, but has so far made no firm commitment to provide financial assistance for the eurozone.

Last month Klaus Regling, the head of the European Financial Stability Facility, travelled to Beijing to try to persuade China's leaders to help.

Europe has been discussing establishing a special purpose investment vehicle to persuade China and other potential contributors, and is exploring the possibility of linking it to the IMF.

Lagarde visited Moscow before heading to China, and on Wednesday the Russian government said it was not prepared to invest directly in the EU rescue fund and would prefer to help the eurozone through the IMF.

Any move to help developed European countries out of the current crisis would be a hard sell for the leaders of China, where millions of people still live in poverty, and inflation and housing costs are straining household budgets.

Men Jing, chair of European Union-China relations at the Belgium-based College of Europe, said in a comment piece published in the official China Daily newspaper that Europe needs to behave in a "responsible way."

"It is ridiculous that rich European nations have their begging bowls out and want money out of the pocket of China, whose per capita income is only about $4,000," she said.

China has also been burned before on risky overseas investment. It bought stakes in investment bank Morgan Stanley and asset management firm Blackstone only to see values collapse in the 2008 global financial crisis.