China’s influence in Europe grew this week with the agreement to buy Greek government bonds. Wen Jiabao, the Chinese prime minister made an offer on Saturday during a visit to buy Greek debt. Wen did not reveal how much Greek debt China would be willing to buy or which Chinese entities would buy the bonds.
Wen and the Chinese government are attempting to give this air international solidarity to the whole transaction. In reality this could be nothing further from the truth. In fact I am of the opinion that this is Chinese imperialism gaining a foothold in Europe. A strategic move that will have tremendous benefits for Chinese business.
When Greece became bankrupt because of the borrowing scam created by Goldman Sachs, they turned to the European Union for help. This help that in theory is supposed to be available, was denied by leading EU nations. Germany’s Angela Merkel became the most vocal opponent of any help to Greece, demanding they push through austerity measures in order to receive any aid. Greece was, as expected, opposed to this type of arrangement. It was similar situations like this a month or two ago that made it seem like the EU might break up.
This blatant attempt to manipulate the government and people of Greece did not go unnoticed. China has notice the treatment of Greece and has stepped in posing as a saviour. Greece has had little choice in seeking help with its financial situation. China is the only one offering to help, so out of necessity, they are going to take it. This opens the door for China to gain influence in Europe. Right now, Germany and Russia have pretty much all the influence. That may soon end in Greece.
This deal with China will have Greece indebted to the Asian powerhouse, meaning the Chinese government will have a great deal of clout in Greek affairs. This opens the doors for Chinese businessmen to make some investments. Most probably this will “encourage” Greek businesses to purchase cheap goods from China. Of course, Greek is not in a good situation right now, not able to buy very much. This does however made sense when one considers that China is refusing to appreciate in currency value sharply.
This slow rise will allow troubled Greek businesses to be able to afford Chinese goods. If you’ve been keeping up with economic news, then you’ll be familiar with the US’s very aggressive, almost war like stance against China for refusing to appreciate its currency more quickly. A refusal to increase the value of the Chinese yuan would make perfect sense in this situation.
Chinese state entities have been apprehensive about investing in foreign financial markets and the Chinese government faces domestic political pressure for losses suffered by these entities during the global financial crisis. Despite these facts China is pushing ahead with the debt purchase anyway. Using this situation to get a foothold of influence in Europe would explain why they are taking this risk.
This situation has the potential to be quite dangerous if larger European powers or the US intend to challenge China’s new found power with this deal.