European Debt and China’s Marshall Plan

What’s the Latest Development?

China is seeking to calm its own population over concerns that it will use its vast currency reserves to bail out European countries weighed down by sovereign debt. Chinese Premier Wen Jiabao says it is in China’s own interest to keep Europe from sinking, which provides the Chinese their largest export market and its biggest source for importing technology. Many Chinese officials have been critical of their government’s investment in the West, believing the country’s economic reserves should benefit those who helped create it.

What’s the Big Idea?

A China ready to prevent the collapse of Europe certainly speaks well for the interconnectedness of a global market system. The US, for its part, has publicly promised to see its European allies through its moment of crisis but booming budget deficits, a faltering economy, and worries over its own vulnerability to European debt will greatly limit its generosity. Germany, now firmly in control of Europe’s economic decisions, has gone out of its way to act independently of China’s purse strings by, for example, criticizing its human rights record.

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