Don’t ask, don’t get

14 September 2011 By John Foley Follow @johnsfoley

Beijing has implied it will buy euro zone bonds if it is granted coveted “market economy” status. The balance of power is in China’s favour so there may be a temptation to say yes. But China isn’t a market economy. The better solution is for Europe to get its house in order.

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China’s premier Wen Jiabao said that China had faith in the European Union’s ability to see through its sovereign debt crisis, but advised that “as a friend” Europe would do well to grant China “market economy” status, a badge that would make it harder to apply trade sanctions to Chinese goods. Wen was speaking at the World Economic Forum in Dalian, China.

Market economy status, which neither Europe nor the United States have yet given China despite its requests, changes the way in which alleged subsidies to industries are calculated. In complaining against a non-market country, the accuser is allowed to use proxies from a third country to work out real costs and prices in the economy.

Wen also said that China supported the United States, but added that he would like to see the U.S. market opened up to Chinese investment, and for curbs on exports of certain high-technology products to China to be eased, reiterating comments made in his trip to America in September 2010.

Italy confirmed on Sept. 13 that it held talks with Chinese officials amid reports that Rome may ask Beijing to offer investments and buy bonds to help the country manage its debt load. The yield on Italian 12-month bonds issued on Sept. 13 was an average 4.2 percent, compared to 3.0 percent in August.

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