China minister warns EU debt crisis could turn 'chronic'

China’s commerce minister has warned that measures being taken in Europe to fix the sovereign debt crisis are “turning an acute disease into a chronic one”, state media said on Friday.

The comments from Chen Deming come after China said this week it supported measures taken by the European Union (UE) and the International Monetary Fund (IMF) to ensure financial stability in the eurozone and pledged to buy government debt.

But Chen said the €750-billion rescue fund set up for EU countries struggling under mountains of debt as well as ongoing bond sales would not resolve the crisis.

“These measures are turning an acute disease into a chronic one. It’s hard to say if the nations mired in the debt crisis can recover in three to five years,” Chen was quoted saying in the Shanghai Securities News.

He also warned China must closely watch the development of the crisis, particularly in January and February.

Can the debt be controlled?
Earlier this week, Chen told reporters on the sidelines of Sino-EU trade talks in Beijing that China was “very concerned about whether the European debt crisis can be controlled”.

China’s ambassador to the EU, Song Zhe, however, said the Asian country was confident “the euro will emerge from the crisis”, in remarks posted on the foreign ministry’s website on Friday.

Foreign ministry spokesperson Jiang Yu on Thursday repeated China’s backing to eurozone countries and said Europe would be a “major market” for investment of Beijing’s massive foreign exchange reserves.

But Jiang refused to comment on specifics about how Beijing would invest in Europe.

China has pledged to buy bonds from Greece and Portugal but it has not yet made any concrete commitments on the size of its investment.

A report in Portuguese newspaper Jornal de Negocios said on Wednesday that Beijing was ready to buy up to €5-billion of Lisbon’s sovereign bonds.

Analysts said China’s support for the euro was being driven by its desire to ensure its biggest trade partner continues buying its exports and to diversify its world-leading foreign exchange holdings away from the dollar.—Sapa-AFP

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