20101005, Article, "China to buy Greek bonds, supporting shipping", contributied by kyungjin Lee

China to Buy Greek Bonds, Support Shipping (The Wall Street Journal, October 3, 2010) 

 Chinese Premier Wen Jiabao offered Greece a major vote of confidence on a visit to the debt-ridden European nation, saying China will continue to buy Greek bonds and announcing the creation of a $5 billion fund to help Greek shipping companies buy Chinese ships.

The remarks represent some of China's most substantive support for the euro zone amid its ongoing debt troubles and reflect the Asian giant's growing willingness to wield its economic clout to obtain wider international influence. Mr. Wen's weekend visit kicks off a week of intensive Chinese-European diplomacy, with the premier heading to Italy and Turkey as well as to summit meetings with European Union leaders in Brussels.

"We hope that by intensifying cooperation with you, we can be of some help in your endeavor to tide over difficulties at an early date," Mr. Wen said Sunday in a speech to the Greek parliament, according to China's state-run Xinhua news agency. "China will not reduce its euro-bond holdings and China supports a stable euro," he said.

China has long had economic interests in Greece, primarily in its shipping industry, and it runs a substantial trade surplus with the European country. China's relations with Greece have picked up in recent months as Greek officials have actively lobbied the Asian nation to support its economy. Athens is desperate for investment as the country struggles to claw its way out of a deep recession and a debt crisis that drove it to the brink of bankruptcy in May.

Mr. Wen's visit "is an act of confidence in the Greek economy," Greek government spokesman Giorgos Petalotis said Friday. "The agreements in trade, development and tourism will truly help our country, having a partner with such influence, given today's difficult environment."

Commercial officials from both nations exchanged visits in June, promising to boost trade and economic ties, and Beijing has said previously that it supports Europe's efforts to deal with its financial woes. Those vows were repeated and expanded with the state visit by Mr. Wen that started Saturday.

"China is prepared, hand in hand with the EU, as passengers in the same boat, to strengthen cooperation to confront the financial crisis," Mr. Wen said Saturday. He also said China is encouraging its companies to invest in Greece, and predicted that trade between China and Greece likely will double in five years to $8 billion annually. Last year, China exported €3.04 billion ($4.19 billion) to Greece but bought just €93 million of Greek imports, according to EU data.

After overseeing the signing of agreements in shipping, construction and technology with his host, Prime Minister George Papandreou, on Saturday, Mr. Wen announced China's intention to invest in Greek bonds and the creation of a substantial fund to finance the purchase of Chinese ships by Greek shippers.

"With its foreign exchange reserves, China has already bought and intends to buy new Greek bonds," he said. "China will undertake a great effort to support euro-zone countries and Greece to overcome the crisis."

Support from China could be crucial for Greece, which is looking to return to borrowing in the international debt markets next year. While the bulk of China's foreign-exchange reserves of $2.454 trillion are held in U.S. debt, numerous companies and governments have been looking to take advantage of Beijing's push to diversify into other currencies and assets. China bought €400 million of Spanish government debt earlier this year.

Mr. Wen also announced China would support the further development of Greek shipping companies with a new $5 billion fund. "That is an offer to support the purchase of Chinese ships by Greek shipping companies," the Chinese premier said.

The financial crisis could be the start of a turning point in economic ties between China and Greece, which has for years sought Chinese investment with the pitch that their country's location offers a strategic springboard for trade between Asia and southern Europe.

With Athens now preparing to sell off state assets to raise desperately needed cash, officials are arguing that the crisis makes Greece a good bargain for Chinese investors. As part of the bailout it sought from the EU and International Monetary Fund, Greece has imposed unprecedented austerity measures and vowed to privatize €3 billion in government assets over three years.

"Greece is an opportunity because it has undervalued assets due to its systemic crisis. When there is a crisis and risk, there is a very significant profit margin," Greek Investment Minister Haris Pamboukis said.

Greece is also hoping to build on the success of China's existing investments. The flagship project is the 35-year concession state-controlled shipping giant Cosco Shipping Co. won in 2008 to run the two main container terminals at Piraeus port outside Athens. The deal, valued at €3.4 billion, should result more than a tripling of capacity.

Cosco Chairman Wei Jiafu, who accompanied Mr. Wen on the visit, has said he sees the port as the base to seize other opportunities that arise with Greece's privatization drive.

Cosco's shopping list includes a goods warehouse at Thriassio outside Athens, port installations in Greece's second city of Thessalonica and a new airport at Kastelli in Crete. The Chinese firm would also like to develop a shipping repair yard at the Perama yard outside Piraeus.