A Europe that Can Still Say No? China and the Eurozone Crisis

China’s potential involvement in the eurozone crisis had triggered a wave of speculation about the political, economic, and strategic implications of China ' buying up ' or ' bailing out ' Europe. This came on top of previous rounds of debate about leverage that Chinese foreign direct investment (FDI), the lure of the Chinese market, and the burgeoning EU-China trade relationship might provide over the EU for Beijing. This speculation had been fanned by leading figures in Europe and China. Chinese Premier Wen Jiabao made a statement in September 2011 that seemingly linked support for the eurozone to the EU granting China ' market economy status ' (MES). Klaus Regling, chairman of the European Financial Stability Facility (EFSF), paid a visit to Beijing in October 2011, soliciting Chinese contributions at a sensitive juncture in the evolution of the crisis. Prime ministers from Greece to Hungary had been touting Chinese bond purchases as votes of confidence in their countries’ finances for well over a year.

Yet the reality had so far been less dramatic. China did not swing in behind the EFSF. From the limited amount of information available, its bond purchases appeared to be skewed heavily towards the ' safe ' core bond issuers in Europe rather than support to the more distressed periphery. Chinese FDI in Europe remained very modest, at barely 0.2 percent of the total inflow.1 Then Chinese officials moved from cultivating ambiguity about their potential involvement in eurozone rescue packages towards actively dampening expectations. On the EU’s part, there had been no sign of major concessions being offered to China in the hope that this will smooth the way for Chinese cash.

So why so much noise? Why so little action? And had anything of consequence really taken place at all?