China emerges as potential savior for Greece

Want China Times, Staff Reporter 2015-07-06

Premier Li Keqiang speaks at the 17th China-EU Summit in Brussels,
June 29, 2015. (Photo/Xinhua)

China has emerged as a possible savior for Greece after voters rejected an international bailout offer in Sunday's referendum, says the US-based Foreign Policy magazine.

Greece has become the first developed country in history to default on a loan from the International Monetary Fund after failing to make its US$1.73 billion repayment last week. The 61% "no" vote in the referendum has only added to the uncertainty over whether Greece will leave the eurozone.

Eyes have now turned to China, with its US$4 trillion in hard currency reserves and US$21 trillion in savings, to potentially pay off Greece's debt. Foreign Policy notes that China loaned some US$22 billion to Latin America last year, more than the World Bank and Inter-American Development Bank combined.

There are many reasons why China might want to intervene to save Greece, the Foreign Policy piece said. Europe is China's largest trading partner, with overall economic interaction between the two sides reportedly totaling as much as €46 billion (US$51 billion). Coupled with a slowing Chinese economy and instability in stock markets, Beijing has plenty of incentives to bail out Athens.

Additionally, China is said to have expressed interest in having Greece serve as the Western terminus of its ambitious "Belt and Road" initiative to boost connectivity and cooperation among countries throughout Eurasia. Part of the initiative will likely be funded by the Asian Infrastructure Investment Bank (AIIB), of which Greece is not a member but a dozen or so other European nations are.

Another reason for Chinese intervention is the largest Greek port of Pireaus, for which the countries signed a US$5 billion cooperation deal last year. Athens has put the port up for sale and Chinese logistics company Cosco, which currently manages two container piers at Pireaus, is interested in acquiring a majority stake. The port was a key staging area for the Chinese evacuation of more than 30,000 of its citizens from Libya in 2011.

China has also exhibited a willingness to lend money to countries with poor ratings, the report said, noting that the country has loaned more than US$25 billion to economically or politically unstable nations like Venezuela, Argentina and Russia.

There remain substantial financial risks Beijing in underwriting a bailout for Greece, though the potential political gains could also be substantial, Foreign Policy said. If China manages to save Greece and maintain a stable eurozone, EU countries may be more willing to relax sanctions against China, especially export controls on technology or arms, or boost China's influence in Europe.

China's Laohucaijin.com suggests that Greece could conceivably receive a bailout from the AIIB, which is close to officially commencing operation, as opposed to the IMF. At the 17th China-EU Summit in Brussels last month, Premier Li Keqiang expressed a desire for Greece to remain in the eurozone, though it remains to be seen whether China would ultimately be willing to take the chance.

Related Articles:

BRICS nations launch new bank, currency pool - New

Lagarde calls for Greek debt restructuring

Beijing considering investment platform to aid EU recovery

Greek voters reject austerity demands in referendum

Across Europe, protesters call for solidarity with Greece

Australian heads to Greece to help crying pensioner in photo

Crying Greek pensioner: the story behind the poignant photo

Greek pensioner, Giorgos Chatzifotiadis, cries as he sits on the ground

outside a national bank branch in Thessaloniki on July 3, 2015 (AFP

Photo/Sakis Mitrolidis)