China's Stake in Europe's Stability

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Audio Transcript:

Lisa Mullins: I'm Lisa Mullins and this is The World. The debt crisis in Greece still has Europe in a tailspin and it's got Greek Prime Minister George Papandreou fighting for his political survival. Today, Papandreou offered to scrap his plan to ask the Greek people to vote on the European bailout plan. The referendum plan had set off an uproar in the European Union and in the Greek Prime Minister's Party. And now opposition leaders are calling for Papandreou's resignation and for new elections. As the turmoil in Greece continues, European leaders are still looking to China for some financial help. But today at the G20 Summit China's Vice Finance Minister said it's too early to talk about Chinese investments in the European stability fund. Well people inside China aren't thrilled with the idea either. The World's Mary Kay Magistad is in Beijing and she says Chinese are venting their frustration online. They've posted more than 100,000 Microblogs, that's China's version of tweets about the Eurozone debt crisis.

Mary Kay Magistad: Overwhelmingly they're against China helping to bail out Europe. They're saying you know, why help Europe when we're poor Chinese and we could use the money here? Well, one easy answer is that for China to bring the money home it would have to convert US dollars or euros into yen, which would drive up the value of the yen or the Renminbi, the Chinese currency, and the Chinese government has been trying for years to keep the value of the currency low because that keeps the value of its exports competitive. However, it is coming under this kind of pressure, a couple of the comments that have been made online in Microblogs, which is like Twitter, are "this is the people's blood and sweat money that's being used to bail out glutenous and lazy Greeks" and another one, "the average wage of Chinese workers is a few US dollars. The average wage of European workers is thousands of euros. Do they need China to rescue them?"

Mullins: Well, here's the problem, I mean maybe they do need China to rescued them and China needs them to be rescued, is that not the case?

Magistad: Well, that is certainly a fair comment because the European union is China's biggest trade partner and Europe accounts for about a quarter of China's trade. So China can't afford to see Europe go down. But the attitude so far has been yes, we're invested in seeing you come out of this, we believe in your ability to come out of it. In fact, Hu Jintao, China's President Hu Jintao said on Monday, "We're convinced that Europe has the wisdom and the competence to conquer its difficulties" which is a way of saying we're gonna stand back and if it becomes clear that the only way that you're going to survive this is with our help we'll do something, but it's gonna come at a domestic cost to us, so we'd prefer not to step in and do that if we don't have to.

Mullins: Is it suffering any kind of domestic or political cost though right now, China, because the crisis may well dent if it hasn't yet, the demand for Chinese goods, and hurt what is an export-dependent economy there? Is that showing itself right now?

Magistad: Well, even as it's criticizing the Greeks right now for being too democratic, the Chinese government which is not democratic is having to behave like a democratic government. It has to be responsive to the public outcry of how dare you give away our money? There's a leadership transition coming up next year in China. Communist party transition followed six months later by the state transition, president, premier, etc., and there's a lot of jockeying for position now and even though the population doesn't vote for the next generation of leaders, there is political capital in having the support of the population.

Mullins: How are the Chinese media, state run media there covering what's happening financially in Europe and elsewhere?

Magistad: Well, there's been a lot of criticism over the last few weeks of the western capitalist model and how it's basically been shown to be an utter failure. And I find this kind of amusing because China now is very much in most ways a capitalist economy, sometimes brutally capitalist. So you have China playing by some of the rules of capitalism even as journalists are saying you know, shame on you, and why didn't western journalists pay more attention to the Occupy Wall Street's because it's all you know, the game is fixed and you only care about the elites, and that's why our model is better.

Mullins: The World's Mary Kay Magistad in Beijing. Thanks, Mary Kay.

Magistad: Thank you, Lisa.