According to Financial Times, when Guido Mantega, Brazil’s finance minister, suddenly proposed a “Bric” rescue package for the eurozone this week, he caught not only other world leaders by surprise but also many of his fellow countrymen.
Even as officials from other members of the so-called Bric grouping, Russia, India and China, said it was the first they heard of the idea, many ordinary Brazilians expressed shock at the notion of bailing out the world’s richest trading bloc.
China’s reserves are managed un- der a set of relatively strict criteria and do not represent a piggy bank that Beijing can dip into at will.
Even if China were in a position to shift some of its reserves into peripheral European bonds there is no clear argument why it should, especially when other European countries, such as Germany, appear unwilling to do so.
Some prominent Chinese economists have asked why China should invest in a currency which may not exist a few years and why hundreds of millions of poor Chinese, who lack access to even basic social services, should pay for rich Europeans to retire early.
Wang Yong, a professor at China’s central bank training institute in the Chinese city of Zhengzhou, said on September 16 that Beijing should invest in European equity, real estate, hightech products and planes rather than buying bonds.
But Mr Bhalla said China had to play the key role, and also has a far stronger moral obligation to assist the eurozone, given how it has profited.
“China has grown rich and fat off the land because they have intervened and kept their currency from appreciating, and practiced mercantilist trade policy to the extreme.”