Note that Wen Jiabao’s assessment is that the Eurozone debt crisis continues to get worse. Obviously, the world’s second largest economy has no confidence in the numerous measures and bailouts enacted to date by the Eurozone’s coterie of inept politicians. That Beijing has arrived at such a conclusion regarding economic and fiscal policymaking in Europe is as clear a sign as any that the political class in the European monetary union has failed abjectly in restoring market confidence amongst those actors most critical for Europe, namely China’s ruling elites.
Wen Jiabao goes on to say, “The main worries are two-fold; first is whether Greece will leave the Eurozone. The second is whether Italy and Spain will take comprehensive rescue measures. Resolving these two problems rests with whether Greece, Spain, Italy and other countries have the determination for reform.”
Reading between the lines, it would appear that China’s ruling circles are terrified at what is unfolding in Europe, and are as uncertain as everybody else regarding their future trajectory. They have good reasons for worrying. The Eurozone is a critical trade destination for China’s exports. At a time when artificially stimulated growth is beginning to wane in China, a sharp drop in exports to Europe would have disastrous consequences, economically and politically, for Beijing. It would appear that China’s leadership is hoping, perhaps even praying, that the core economies in the Eurozone, especially Germany, will undertake far more radical measures than implemented to date, in the hope that the entire monetary union will not unwind.
What must be going through the collective minds of China’s ruling Communist Party is that if the Eurozone comes apart, resulting in the spread of financial and economic chaos across the globe, the chickens will come home to roost on China’s shores, leading to political instability and unrest that threatens the Chinese Communist Party’s monopoly on political power. Indeed, Premier Wen Jiabao has a great deal to worry about, and so do his colleagues in China’s ruling Politburo.