What China Would Gain from Europe in Bailing Out Euro Zone

A Chinese paramilitary officer stands in front of the European Union flag outside the office of the E.U. delegation to China in Beijing on Oct. 28, 2011

In years to come, economists and historians might hark back to this week as the moment the balance of world power tipped toward China. The signs have been there for while, but the symbolism is especially potent now, in the few days between yet another euro-zone crisis summit, held in Brussels on Oct. 26, and the Nov. 3-4 G-20 summit in Cannes, France. The reason for choosing this as the watershed is crudely financial: at the Brussels summit, European leaders made a previously unthinkable appeal for China to use its $3.2 trillion currency reserves to help dig the euro out of its debt hole. And while the euro zone is anxiously awaiting an answer, China — inscrutable about its intentions — is milking the moment.

China is being targeted as a potential investor as part of a complicated scheme agreed to at the summit to leverage Europe's bailout fund up to €1 trillion ($1.4 trillion), along with other potential outsiders like Russia, Brazil, Middle Eastern countries and the International Monetary Fund. On Oct. 27, French President Nicolas Sarkozy, who is hosting the Cannes G-20 gathering, phoned Chinese President Hu Jintao to seek backing. "If the Chinese, who have 60% of global reserves, decide to invest in the euro instead of the dollar, why refuse?" Sarkozy said after his call. "Why would we not accept that the Chinese have confidence in the euro zone and deposit a part of their surpluses in our funds or in our banks?" (See "Europe's Debt Crisis Agreement: The Good, the Bad, the Ugly.")

China can certainly spare the €100 billion ($140 billion) reportedly being discussed among officials. The real question is why China would want to plant it in a low-growth region like the euro zone. The bond-leverage scheme has already generated its share of criticism, and Greece's recently announced euro referendum only adds to the uncertainty and risk. The Chinese government's official news agency, Xinhua, cautioned in an editorial that "emerging economies should not be seen as Europe's Good Samaritans."

Yet there are still strong reasons that China might park some of its funds in the bailout scheme or some other bond offering. One is that it is already heavily involved: a quarter of China's currency reserves are thought to be held in euros, and Beijing has been a regular buyer of euro-zone bailout bonds in the past. Over the past year, the Chinese government has made several pledges to purchase European debt issues, both at the bilateral level with indebted countries — including Portugal, Greece and Hungary — and toward the euro zone as a whole. (See why the euro hasn't been fixed yet.)

China also has a vested interest in shoring up its biggest trading partner, with which it had bilateral dealings worth €363 billion ($503 billion) last year, almost 10% of the total global-trade flow. China's growth prospects depend heavily on Europe's consumers, whose average per capita GDP is about $32,500, compared with about $4,500 in China. A weaker euro would make Chinese exports more expensive for Europeans. And maintaining the euro as a reserve currency aids China's efforts to counterbalance the U.S. dollar and create a multipolar global economic system.

But significantly, this hands China a remarkable opportunity to extract concessions, both economic and political. In September, Chinese Premier Wen Jiabao implied an effective quid pro quo when he asked Europeans to "put their houses in order," almost as a condition for China's "extending a helping hand." (See pictures of the global financial crisis.)

In trading terms, this might be reflected in the recognition of China's status as a "market economy" when it comes to European Union trade sanctions, a measure that could boost exports otherwise hindered by tariffs. And since the E.U. currently has some 55 anti-dumping measures in place against China, individual member states might also be pushed to ease their stance on future sanctions. Other trade issues might slip from the agendas, to the chagrin of European exporters, who regularly gripe about Chinese rules on foreign ownership, subsidies reserved for Chinese firms, lack of access to the public-procurement market and selective enforcement of intellectual-property rules.

These concerns were already raised in July by the European Council on Foreign Relations, which published a paper titled "The Scramble for Europe" on China's "game-changing" economic presence in Europe. It warned that if China became too involved in major financial, investment and public issues, it would leave the Europeans little leverage to improve their access to the same sectors in China, which are mostly closed or controlled.

The political implications are potentially even more troubling for Europe, which has long considered it a right, even a responsibility, to criticize China on issues like human rights and environmental protection. It could mean, for example, that the E.U. lifts its ban on arms sales to China, imposed in the wake of the 1989 Tiananmen Square massacre, or that the Dalai Lama receives fewer invitations to meet European leaders. Fredrik Erixson, director of the European Centre for International Political Economy, a Brussels-based think tank, says that even if there are no formal trade-offs, Beijing could expect generous favors from Europe after years of what it considers intrusive interference. "China wants something more: international recognition in one way or the other, or a Europe that in Beijing's view stops poking its nose in internal Chinese politics," Erixson says. (See pictures of China's investments in Africa.)

At Cannes, Chinese leader Hu will doubtless refrain from any early commitment on the euro-bailout scheme, while soaking up the flattery from Europe's pleading leaders. But he will be aware that as China consolidates its emergence as a world player, any investment risks in the program would be a small price to pay for the wave of European goodwill it would generate.

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From Europe With Love: U.S. 'Indignados' Occupy Wall Street

A Wall Street protester wakes up at Zuccotti Park that she and hundreds of other activists are occupying on October 3, 2011 in New York City. (Photo: Spencer Platt / Getty Images)

As the momentum surrounding the Occupy Wall Street protest grows, so too has the urge to frame it in the context of other struggles around the world. Already, Zuccotti Park, the patch of Lower Manhattan taken over for weeks now by the protesters, has been hailed as an American Tahrir Square, a font for a “U.S. autumn” as that plaza in Cairo was for the Arab Spring. Days of action and protest have been dubbed “days of rage,” a gesture to recent, far bloodier episodes of dissent on the streets of Syria, Yemen, Bahrain and elsewhere in the Middle East. When some 700 activists were detained while marching across the Brooklyn Bridge over the weekend, they were, according to some reports, “kettled” — a tactic used by London's Metropolitan Police against student demonstrators frequently over this past year. And a colleague of mine asked whether the protesters were the left's answer to the far-right U.S. Tea Party.

Yet no parallel seems more apt than what's been taking place immediately across the Atlantic in Spain. The indignados, the outraged, have massed in Madrid and other cities across the country since May, furious at the debt-ridden nation's turn toward austerity measures at a time of over 20% unemployment and enraged by the haplessness and incapacity of political leaders and prevailing global economic institutions to stave off catastrophe. The occupations of iconic squares like Madrid's Puerta del Sol are in some sense the template followed now by American protesters in a growing number of cities — around 148, according to organizers in Lower Manhattan — across the United States.

(PHOTOS: The Best Images from Occupy Wall Street)

“We see ourselves as the continuation of this global movement,” says Patrick Bruner, who, at the time of writing, was the designated press secretary of Occupy Wall Street. “And it's now springing up in a place where most of the world's problems originated — Wall Street.” Not surprisingly, sensing the importance of what's transpiring in Manhattan, organizers in Spain have already called for Oct. 15 to be a global day of action.

The similarities between the Occupy Wall Street crowd and the indignados are legion. Both in Spain and in New York, protesters have depended on social media to coordinate action and have embraced the chaotic, decentralized nature of their movements. The same frustrations and grievances animate the protests on either side of the pond. “Everywhere there is a great sense of confusion and disillusionment with traditional institutions of political and economic power,” says Vicente Rubio, a 32-year-old Spanish teacher in the New York City area originally from Zaragoza, Spain, and a regular now at Zuccotti Park. “There's a general sense that all the struggles are connected.”

And what's the aim of all this struggle? A visit to Zuccotti Park — and a scan of all the motley signs and causes hawked there — would give the impression that there is no central vision. “But,” says Rubio, “it's most important to consider this as a process rather than something with definite goals and demands. We're trying to create a productive means to channel this feeling of discontent.”

Throughout, activists and attendees speak of reclaiming democracy from the clutches of a plutocratic elite, and empowering that vast “99%” of the U.S. left behind by the excesses of the mega-rich and a government supposedly in the pocket of corporate interests. The rituals of the protest, from the open-ended commitments of volunteers to the free-for-all, twice-a-day forums known as the General Assembly, says Bruner, all speak to a “form of direct, participatory democracy” taking root in the movement.

In Spain, that idea has been furthered somewhat more concretely, with some pushing electoral platforms that would break the predominance of the country's two main political parties — one center-right, the other center-left — and allow more direct citizen engagement in the legislative processes of government. Whether any of the measures actually get implemented is uncertain, but according to some polls a whopping 80% of Spaniards agree with the indignados' demands.

Those rallying behind Occupy Wall Street may not be so numerous, but that could change. The protests have been boosted by the support of organized labor and other national-level activist organizations like MoveOn.org. And, despite dipping temperatures along the Atlantic seaboard, those camped out in Zuccotti Park and a growing number of other spots throughout the U.S. look prepared to tough it out. In Spain, says Rubio, the indignados gained traction in part because of the natural Spanish affinity for public space — something not quite matched in the U.S. But the fact that Occupy Wall Street is gaining steam nevertheless ought to be a sign for optimism. Rubio casts his involvement here as a means of tapping into a larger global uprising. “There is no inside or outside in this movement. As a Spaniard living in New York, [joining Occupy Wall Street] is my way of collaborating, my way of participating in the struggle back home.”

Standing in Zuccotti Park, with an ever growing pack of foreign and local press hovering in the margins, it's clear that there's a real spirit to the proceedings. Drum circles and elaborate theatrical costumes echo some of the festivities and hi-jinks seen at Puerta del Sol in Madrid. “Of course, the focus is on the very real grievances we all have,” says Bruner, the protest press secretary.  “But at a basic level, this is really about making people happy again.” And that's an aspiration which knows no bounds.

From Europe With Love: the U.S. Indignados Have Arrived

A Wall Street protester wakes up at Zuccotti Park that she and hundreds of other activists are occupying on October 3, 2011 in New York City. (Photo: Spencer Platt / Getty Images)

As the momentum surrounding the Occupy Wall Street protest grows, so too has the urge to frame it in the context of other struggles around the world. Already, Zuccotti Park, the patch of Lower Manhattan taken over for weeks now by the protesters, has been hailed as an American Tahrir Square, a font for a “U.S. autumn” as that plaza in Cairo was for the Arab Spring. Days of action and protest have been dubbed “days of rage,” a gesture to recent, far bloodier episodes of dissent on the streets of Syria, Yemen, Bahrain and elsewhere in the Middle East. When some 700 activists were detained while marching across the Brooklyn Bridge over the weekend, they were, according to some reports, “kettled” — a tactic used by London's Metropolitan Police against student demonstrators frequently this year. And a colleague of mine asked whether the protesters were the left's answer to the far-right U.S. Tea Party.

Yet no parallel seems more apt than what's been taking place immediately across the Atlantic in Spain. The indignados, the outraged, have massed in Madrid and other cities across the country since May, furious at the debt-ridden nation's turn toward austerity measures at a time of over 20% unemployment and enraged by the haplessness and incapacity of political leaders and prevailing global economic institutions to stave off catastrophe. The occupations of iconic squares like Madrid's Puerta del Sol are in some sense the template followed now by American protesters in a growing number of cities — around 148, according to organizers in Lower Manhattan — across the United States.

“We see ourselves as the continuation of this global movement,” says Patrick Bruner, who, at the time of writing, was the designated press secretary of Occupy Wall Street. “And it's now springing up in a place where most of the world's problems originated — Wall Street.” Not surprisingly, sensing the importance of what's transpiring in Manhattan, organizers in Spain have already called for Oct. 15 to be a global day of action.

The similarities between the Occupy Wall Street crowd and the indignados are legion. Both in Spain and in New York, protesters have depended on social media to coordinate action and have embraced the chaotic, decentralized nature of their movements. The same frustrations and grievances animate the protests on either side of the pond. “Everywhere there is a great sense of confusion and disillusionment with traditional institutions of political and economic power,” says Vicente Rubio, a 32-year-old Spanish teacher in the New York City area originally from Zaragoza, Spain, and a regular now at Zuccotti Park. “There's a general sense that all the struggles are connected.”

And what's the aim of all this struggle? A visit to Zuccotti Park — and a scan of all the motley signs and causes hawked there — would give the impression that there is no central vision. “But,” says Rubio, “it's most important to consider this as a process rather than something with definite goals and demands. We're trying to create a productive means to channel this feeling of discontent.”

Throughout, activists and attendees speak of reclaiming democracy from the clutches of a plutocratic elite, and empowering that vast “99%” of the U.S. left behind by the excesses of the mega-rich and a government supposedly in the pocket of corporate interests. The rituals of the protest, from the open-ended commitments of volunteers to the free-for-all, twice-a-day forums known as the General Assembly, says Bruner, all speak to a “form of direct, participatory democracy” taking root in the movement.

In Spain, that idea has been furthered somewhat more concretely, with some pushing electoral platforms that would break the predominance of the country's two main political parties — one center-right, the other center-left — and allow more direct citizen engagement in the legislative processes of government. Whether any of the measures actually get implemented is uncertain, but according to some polls a whopping 80% of Spaniards agree with the indignados' demands.

Those rallying behind Occupy Wall Street may not be so numerous, but that could change. The protests have been boosted by the support of organized labor and other national-level activist organizations like MoveOn.org. And, despite dipping temperatures along the Atlantic seaboard, those camped out in Zuccotti Park and a growing number of other spots throughout the U.S. look prepared to tough it out. In Spain, says Rubio, the indignados gained traction in part because of the natural Spanish affinity for public space — something not quite matched in the U.S. But the fact that Occupy Wall Street is gaining steam nevertheless ought to be a sign for optimism. Rubio casts his involvement here as a means of tapping into a larger global uprising. “There is no inside or outside in this movement. As a Spaniard living in New York, [joining Occupy Wall Street] is my way of collaborating, my way of participating in the struggle back home.”

Standing in Zuccotti Park, with an ever growing pack of foreign and local press hovering in the margins, it's clear that there's a real spirit to the proceedings. Drum circles and elaborate theatrical costumes echo some of the festivities and hi-jinks seen at Puerta del Sol in Madrid. “Of course, the focus is on the very real grievances we all have,” says Bruner, the protest press secretary.  “But at a basic level, this is really about making people happy again.” And that's an aspiration which knows no bounds.