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China cannot rescue Europe with foreign reserves: senior diplomat

12-03-2011 08:29 BJT

BEIJING, Dec. 2 (Xinhua) -- China cannot use its 3.2 trillion U.S. dollars in foreign exchange reserves to rescue other countries, a senior diplomat said on Friday.

"The argument that China should rescue Europe does not stand, as reserves are not managed that way," Vice Foreign Minister Fu Ying said at the Lanting forum, a gathering of Chinese officials, scholars and social groups held by the Ministry of Foreign Affairs to discuss international issues and foreign policy.

"China is not absent from international efforts to rescue Europe; it has been a positive and healthy participant," Fu said.

Since the outbreak of the European financial crisis, China has dispatched more than 30 procurement delegations to Europe, helping to boost imports from the continent, Fu said.

Fu added that there are many misunderstandings about the use of China's foreign reserves. "Foreign reserves are not domestic income or money that can be disposed of by the premier or finance minister," she said.

"Foreign reserves are akin to savings, and their liquidity should be ensured," Fu said.

"Foreign reserves are not revenue and cannot be relocated randomly. Under this circumstance, China should take the prospect of yields into consideration if it invests its foreign reserves," said Tian Dewen, an analyst at the Institute of European Studies at the Chinese Academy of Social Sciences.

However, the outlook for the economic situation in the eurozone is currently uncertain, Tian said.

Fu said China learned a lesson about the importance of foreign reserves during the Asian financial crisis of the late 1990s. ' "Reserves cannot be used domestically to alleviate poverty or taken abroad for development support," she said.

She said that the way in which foreign reserves are managed should be in line with the principles of "safety, liquidity and proper profitability."

"China's purchases of European bonds, International Monetary Fund bonds and U.S. bonds are also based on those principles," Fu said.

Fu also said that China has no intention to gain profit by leveraging financial instruments.

"China will make efforts to overcome the crisis with Europe and the international community in the future," Fu said.

"As for the current turbulence in European markets, an authoritative voice is necessary in restoring market confidence. However, voices are diversified in Europe due to its political framework," said Chen Xin, an analyst at the Institute of European Studies at the Chinese Academy of Social Sciences.

Fu also reviewed achievements made in trade and investment cooperation between the two sides.

"It is normal for Europe to strengthen its economic cooperation with China in the process of conquering its difficulties, although it is not proper to add negative political implications," Fu said.

She urged Europe not to politicize China's foreign investments.

"Successful investment should be reciprocal. We hope our economic activities are not interpreted from a political prospective and are not imbued with political interests. We should follow market economy principles," Fu said

Fu also took time to single out media reports about the crisis that she believes have been overtly political.

"Many European countries have shown their understanding and support for us, but there have also been some negative reports," Fu said.

"We should treat each other with a moderate and impartial mentality. That will make bilateral relations easier to handle," Fu said.

She cited an investment bid by a Chinese company in Iceland that was turned down by the country's government.

Zhongkun, a private Chinese real estate company founded in 1995, planned to buy 300 square km of land in Iceland to build a high-end resort with a total investment of 200 million U.S. dollars.

However, Iceland's Interior Ministry rejected the bid, citing the size of the area of land involved and the fact that there is no precedent in Iceland for foreign countries to purchase large tracts of land.



Editor:Zhang Pengfei |Source: Xinhua

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