ATHENS (Reuters) � China pledged on Sunday to support a stable euro and not reduce its holdings of European government bonds in an effort to deflect criticism of its foreign exchange policy ahead of an EU-China summit this week.
China, at loggerheads with the United States over the yuan and likely to face similar complaints during his tour of European countries this week, emphasized its willingness to cooperate with the 27-nation EU..
"I have made clear that China supports a stable euro," Chinese Premier Wen Jiabao said during a visit to Greece at the start of a one-week European tour. "We will not reduce the holdings of European bonds in our foreign exchange portfolio," he added.
Wen, who offered on Saturday to buy Greek government bonds when debt-laden Athens resumes issuing, said on Sunday he was glad Greece was starting to emerge from the shadows of its debt crisis.
China has said it needs to diversify its foreign currency holdings and has bought Spanish government bonds. Chinese state entities have been generally conservative about investing in foreign financial markets and the Chinese government faces domestic political criticism over losses they incurred during the global financial crisis.
FREEING THE YUAN
Policy moves by the Chinese government to free the yuan from a dollar peg will help the Chinese currency rise, Dominique Strauss-Kahn, the head of the IMF said on Saturday.
France has not held secret talks with China as part of an effort to heighten coordination of exchange rates, a French presidential palace source said on Saturday, dismissing an earlier Financial Times report.
The London-based paper said talks had been going on for a year and that Paris wanted to open the debate during the G20, rather than push a particular view, and was not proposing fixing rates.
Wen and his Greek counterpart George Papandreou said in a joint statement the world's nations need to coordinate economic policies for global recovery to find a sure footing..
"Global economic recovery is a journey with many turns and a full exit from it requires joint efforts," Wen said on Sunday. He made no comments on the yuan. On Saturday he said he was willing to work with the EU to confront the financial crisis and reform the international financial system.
Ahead of a China-EU summit on Oct 6, Wen urged the block to recognize China as a market economy, a status that would make it less vulnerable to anti-dumping charges under WTO rules.
In exchange, China offered to boost copyright protection and widen bilateral trade. "China commits to improving investment environment, to intensify copyright protection, widen bilateral trade and upgrade technology cooperation," he said in his speech in Greece's parliament through an interpreter.
But despite its growth, China remains an emerging economy, Wen said. "The basic reality of China, such as a huge population, a weak economic base, and unbalanced growth has not radically changed," Wen told parliament.
"Per capita GDP is just one eighth of Greece's and the percentage of population below the poverty line is three times that of Greece. China continues to be an emerging country."
He said he was confident Greece was on track to exit a debt crisis that shook the euro and said China wanted to boost cooperation with Greece, which faces its worst recession in decades.
Bilateral trade volume should double to $8 billion euros a year in 2015 with Greek traditional exports, such as olive oil, increasing.
"A few months ago, (we) signed an agreement to purchase 290 tons of Greek olive oil," Wen said. "Last night, for the first time in my life, I dipped a bite of bread in olive oil. It tasted very good."
(Writing by Harry Papachristou; Editing by Jon Loades-Carter)
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