The Chinese Premier, on his tour of Europe, has said that China supports the Euro and will continue to invest in Euro bonds. This has offered some respite in the deepening crisis gripping the single currency zone, which is part political, part economic and part financial. However these kind words should not be over-interpreted. They do not mean that the issues do not need resolving. They mean the crisis has not become a catastrophe. Had Mr Wen Jiabao declared that China had lost confidence in the Euro and would stop buying the bonds, things in Euro land (and across the world) would have taken a grim turn. It is often easier to measure value by taking it away.
What this declaration does is calm jittery markets a bit and give the pipe dreamers another little high. Its effect is therefore useful. Its meaning, on the other hand, is epoch making and profound. China may be in number two slot in the ranking of the globe’s economies, but it is already the world’s top economic power. This is because China has money. It has more money than anybody else. In the global economy it is not guns, but money, that defines power.
In an interview with Robert Peston he defined his position on Europe with the quotation ‘a friend in need is a friend indeed’. These were Churchill’s words to FDR in appreciation of the US coming to the rescue of Europe in WWII. Wen Jiabao is not only a lover of Shakespeare. He has a sense of history. He reminds us that times have changed. Indeed they have.
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