Analysis: G7 must look beyond China for euro zone rescuer

Tue Jun 5, 2012 7:23am EDT
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By Nick Edwards

BEIJING (Reuters) - Finance chiefs of the Group of Seven industrialized powers hoping China can step in to rescue the euro zone must look elsewhere for a white knight as Beijing increasingly focuses on domestic issues this year.

The G7 policymakers and some members of the wider G20 will hold an emergency teleconference on the euro zone debt crisis on Tuesday in a sign of heightened global alarm about the threat posed by strains inside the 17-nation monetary union. The call comes two weeks before a G20 summit this month in Mexico.

"The question is can the G20 do anything to accelerate and bring forward the date at which China feels it should do something? I'm skeptical," Tim Condon, chief economist and head of Asian economic research at ING in Singapore, said.

China has no intention of over-extending itself near term in pursuit of long-term goals rebuffed back in October 2011 when euro zone and International Monetary Fund officials last asked Beijing for bailout cash, but were unwilling to offer the market access, guarantees, and technology sales demanded in return.

An increasingly inward focus in the final months before a once-in-a-decade leadership transition means only a Lehman-like collapse in confidence that halts global trade and costs millions of Chinese jobs is likely to change Beijing's mind.

"China is totally consumed by juggling what is turning out to be a complicated year domestically. If something coincides with what's good for Europe, happy days, but for them to do something above and beyond... I'm not a big buyer of the view that we're going to have some big kumbaya moment at the G20," Condon said.

The last such moment of unity was in late 2008 when shattered confidence in the world financial system forced central banks to begin printing money to reflate it and led G20 nations to pledge stimulus packages worth some $5 trillion by early 2009 to underpin global growth.

China's 4 trillion yuan ($635 billion) contribution to that effort, unveiled at the end of 2008 and launched in 2009, was vital. The world's biggest single contributor of economic growth essentially underwrote business activity into 2010, but it did so at substantial domestic political cost.   Continued...