Michael Pettis
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Chinese Euro Intervention
Europe can solve its own domestic liquidity issues and it is unreasonable to expect China to resolve European solvency problems.
There is already a great deal of domestic concern about the safety of China's reserve accumulation, and the idea that China is bailing out risky European borrowers, when China has such huge domestic problems, is not likely to be popular at home.
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Will this help Europe? Almost certainly not. Foreign capital inflows come with exported demand and slower domestic growth. Europe can solve its own domestic liquidity problems, and it is unreasonable to expect foreigners to resolve European solvency problems. Turning to foreigners for capital is not a strategy so much as an indication of total confusion.
About the Author
Nonresident Senior Fellow, Carnegie China
Michael Pettis is a nonresident senior fellow at the Carnegie Endowment for International Peace. An expert on China’s economy, Pettis is professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets.
- What GDP Means in a Soft Budget Economy Like ChinaCommentary
- What’s New about Involution?Commentary
Michael Pettis
Recent Work
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
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