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China Cautious About European Bailout Investment


China is playing down the possibility that it might immediately invest some of its vast cash reserves in the European bailout fund.

A Chinese vice finance minister, Zhu Guangyao, met Friday in Beijing with the chief of the European fund, Klaus Regling.

But afterwards, Zhu told reporters that China would wait to see the provisions of the bailout fund. He said China would have a "conscientious discussion" internally before deciding whether to invest in the new $1.4 trillion fund created this week by European leaders.

China has $3.2 trillion in foreign exchange reserves, the world's largest stockpile. In the past, it has bought the government bonds of European countries that are among its biggest trading partners. The Financial Times reported that China might be willing to invest from $50 billion to $100 billion in the bailout fund to assist debt-ridden European governments.

The new bailout fund is more than twice as big as the current one, but European governments are not providing money to fund it, leaving Europe to seek outside investors. Other than demanding a slightly higher interest rate on a possible investment, China also could require Europe to make other concessions, such as supporting it in trade disputes and lifting its embargo on arms sales to China.

Approval of the bailout fund was one part of Europe's debt-relief effort. It is aimed at stabilizing the Greek government's troubled finances, keeping the even bigger governments in Italy and Spain from needing a bailout and calming international financial markets worried about an official Greek default on its debts.

Under pressure from the European heads of state, European banks agreed to forgive about $140 billion in Greek debt. At the same time, the European leaders ordered the banks to increase their cash reserves by $148 billion.

Some information for this report was provided by AP, AFP and Reuters.

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