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February 14, 2012

China Voices Confidence in Euro, Pledges Support

China has given a boost to the battered European common currency during a visit to Beijing by top European Union leaders.

Central Bank chief Zhou Xiaochuan said Wednesday that China has confidence in the euro and will continue to invest in bonds and other securities issued by EU countries.

"The Chinese side will continue to invest in the government bonds of the EU countries with principles of safety, liquidity and value preservation and increment.  And we will get more involved in the resolve of the debt problems of the euro through various possible channels such as IMF and the EFSF [European Financial Stability Fund] and the ESM [European Stability Mechanism] that will be established soon," said Zhou.

While he made no specific commitment, Zhou suggested China would work through the International Monetary Fund and two European bailout funds to help shore up the troubled currency.  The remark reiterated a suggestion made the day before by Chinese Premier Wen Jiabao.

Zhou's remarks helped to boost the euro on international currency markets and were welcomed by the visiting European leaders, who are in Beijing for an annual summit.

Jose Manuel Barroso, president of the European Council, said European leaders have already taken a number of steps to stabilize the euro and improve their region's competitiveness.

"We have taken important decisions to tackle the question of sovereign debt and strengthened the economic governance in the eurozone to improve the financial supervision, to stabilize public finances, to implement the necessary structural reforms and to enhance our competitiveness," said Barroso.

European leaders first reached out last year to China, which has the world's largest foreign currency reserves, as European countries sank into a deepening debt crisis.

Since then, China has continued to invest in European debt at about the same rate as previously but, despite repeated assurances, has been slow to commit to specific measures.

Herman Van Rompuy, the European Council president, told his Chinese counterparts that a stable European currency is in the interest of both sides.

"The key word of the EU-China relationship is cooperation, not rivalry.  That makes this partnership specific.  We both wish to live in a world not dominated by one currency alone and that is why a currency for Europe is vital for you too."

Van Rompuy also told the Chinese that European political leaders are committed to keeping the euro intact.

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