CHINA should urgently seek guidance on whether its holdings of euro periphery debt would be affected by any restructuring, said Yu Yongding, a former adviser to the Chinese central bank.
Until such clarification is provided, or the euro zone comes up with a permanent resolution mechanism, China should give no commitment to support the euro zone through direct government bond purchases this simply risks throwing good money after bad, Yu wrote in the British Financial Times yesterday.
But euro area finance ministers pledged yesterday to strengthen the region s safety net for debt-strapped countries, while indicating they didn t see the need to do more immediately.
The euro has dropped 0.5 percent over the past month in a measure of the currencies of 10 developed nations, according to Bloomberg Correlation-Weighted Currency Indexes.
In other comments, Yu said China could see significantly lower growth as the economy shifts away from dependence on exports and investment over the next four years.
The nation s expansion could become more balanced and stable, he said. The government needed to cool the economy, while avoiding a hard landing.
China will today report a 10.2 percent economic expansion for last year, according to the median estimate in a Bloomberg News survey of 15 economists. Officials have sought to limit inflation risks by raising benchmark interest rates and banks reserve requirements. The government also aims to increase the role of domestic consumption in driving growth. (SD-Agencies)
