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Chinese stop buying European bonds

Wookster
Wookster Posts: 3,795 Forumite
in Debate House Prices & the Economy
Amid resurgent political and financial crisis in Spain and Greece, Gao Ziqing, head of the China Investment Corporation (CIC), said the $440bn (£273bn) fund was "looking at opportunities in Europe" but added: "We don't want to buy any government bonds."
Eurozone leaders have tried to attract investors from Asia to help mop up excess sovereign debt. Both China and Japan have been supportive in the past, in part because Europe is one of their biggest export markets.
The retreat by China came amid political deadlock in Greece, the bank crisis in Spain and signs of a deepening economic recession.

Full article here: http://www.telegraph.co.uk/finance/financialcrisis/9258317/Chinese-sovereign-wealth-fund-stops-buying-European-government-debt.html

Surprised this hasn't been posted yet. Be interesting to know how much debt of the FPIIGS China has bought. It does seem that markets are turning sour on Europe.
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Comments

  • pqrdef
    pqrdef Posts: 4,552 Forumite
    It'll take a long time to live down that haircut, and not only for Greece. The option is perceived to be on the table now.

    If the EU won't guarantee the debt of member states, then the member states will have to invent a new kind of more senior debt with better security. Probably they will have to nationalise assets and mortgage them.
    "It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis
  • FTBFun
    FTBFun Posts: 4,273 Forumite
    GMensler wrote: »
    What about when they stop buying US bonds? I wonder what they will be buying instead? OhI know something that has been pushed down just now, but its a banned subject on here. Its shiny and is competing with paper money.

    Iron Pyrites?
  • pqrdef
    pqrdef Posts: 4,552 Forumite
    GMensler wrote: »
    What about when they stop buying US bonds? I wonder what they will be buying instead? OhI know something that has been pushed down just now, but its a banned subject on here. Its shiny and is competing with paper money.
    I don't follow the train of thought here. If they're iffy about sovereign debt, why would they switch to something far more volatile?

    The days are long gone when precious metals were the ultimate safe store of value. And no, they don't compete with paper money.

    Goldbugs seem to think they'll be OK if the $h1t really hits the fan. What will happen is that a lot of people will be wanting to sell gold, and nobody will want to buy it.

    The vast amount of physical gold stashed by ETFs waiting to be dumped on the market at a mouse-click should be making goldbugs lose sleep at night.
    "It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis
  • greenbubble
    greenbubble Posts: 93 Forumite
    GMensler wrote: »
    What about when they stop buying US bonds? I wonder what they will be buying instead? OhI know something that has been pushed down just now, but its a banned subject on here. Its shiny and is competing with paper money.

    i thought they already had stopped , the only 'greater fools' the USA have buying at the moment are the BoE and BoJ ?
  • purch
    purch Posts: 9,865 Forumite
    As a bit of balance, the C.I.C. is not responsible for investing ALL of China's reserves.

    China has over $ 3 Trillion of FX reserves, and this particular fund manages about $ 400 Billion of those reserves, with a Global Portfolio of $ 135 Billion.

    http://www.china-inv.cn/cicen/include/resources/CIC_2010_annualreprot_en.pdf

    However this is quite important news, and will do little to calm nerves in the Eurozone.
    'In nature, there are neither rewards nor punishments - there are Consequences.'
  • Generali
    Generali Posts: 36,411 Forumite
    10,000 Posts Combo Breaker
    purch wrote: »
    As a bit of balance, the C.I.C. is not responsible for investing ALL of China's reserves.

    China has over $ 3 Trillion of FX reserves, and this particular fund manages about $ 400 Billion of those reserves, with a Global Portfolio of $ 135 Billion.

    http://www.china-inv.cn/cicen/include/resources/CIC_2010_annualreprot_en.pdf

    However this is quite important news, and will do little to calm nerves in the Eurozone.

    My opinion is that the market for most European Government bonds is coming almost entirely from banks that are recycling the money through repos (a type of secured loan) with the ECB.

    I'm not convinced that for many countries' bonds there is much demand at all from genuine investors.
  • thor
    thor Posts: 5,512 Forumite
    Part of the Furniture 1,000 Posts
    If China stopped propping up the west, they would be cutting their own throats. Without America and the Eurozone where would Chinese growth come from? Their domestic markets and the emerging economies will not be anywhere near enough to compensate for the loss of trade. China grew fat on the west and if they could save them by using those profits it would be beneficial for all parties.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    thor wrote: »
    China grew fat on the west and if they could save them by using those profits it would be beneficial for all parties.

    China's plans have no need for the West.
  • RenovationMan
    RenovationMan Posts: 4,227 Forumite
    Perhaps they are looking to snap up some bargain shares now and corporate bonds. By the time this financial crisis is over we'll be owned by the Chinese. Lock, stock, the f'king lot.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    RenovationMan wrote: »
    Perhaps they are looking to snap up some bargain shares now and corporate bonds. By the time this financial crisis is over we'll be owned by the Chinese. Lock, stock, the f'king lot.

    Why pay inflated prices ? When they can make their own.

    Seems as if even the mighty Siemens is passing train technology to the Chinese now. Even the Germans will lose their export markets one day.
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