China will buy European bonds, says WJB, while Paul Donovan is not impressed30 August, 2012, 16:06. Posted by Zarathustra
German Chancellor Angela Merkel is in China, and Chinese Premier WJB is expressing interest in buying European bonds after fully evaluating the risks (via WSJ Chinese), something that is done every once in a while for the peripheral Europe, and is just part of the recurring “China will save the world” theme.
Only that China cannot save the world, and by “China will save Europe”, it only means that China will invest in European bonds such that Europeans will have money to buy Chinese products. So in essence, rather than saving Europe, China will be saving themselves only. But no matter how nonsense such idea actually is for Europe, the idea has been repeatedly floated anyway.
Paul Donovan of UBS is equally unimpressed. WJB might have said that simply to be diplomatic, he said. But perhaps the following reminder from Donovan is more chilling:
Normally China expressing an interest in a Euro market is a prelude to disaster (see Greece, Portugal and Spain for details).