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Barry Naughton Cited on China's Role in the Euro Zone Crisis

Where's the euro zone's white knight? Not in China.

11/10/2011
Nin-Hai Tseng, CNN Money, Fortune

China is one of the few countries with strong growth, it holds massive amounts of cash, and its largest export market is Europe. So why isn't it stepping up to help bail it out?

FORTUNE -- It was around this time last year when Europe's ongoing debt crisis unexpectedly drew the investment savvy of China. Officials from the world's second-largest economy swooped in, promising to back debt-troubled Spain by signing $7.3 billion in deals that spanned investments in everything from banking to energy. This followed China's pledge to back Greece, where officials signed off on what Greeks at the time called the biggest single investment by China in Europe.

All this implied that China was willing to come to Europe's rescue if things took a turn for the worse. Needless to say, things are moving in that direction, as the region's debt troubles spread beyond Greece and into much bigger economies – namely, Italy. On Wednesday, yields on Italian bonds surpassed 7%, approaching levels that previously sent other euro zone nations scrambling for bailouts. Prime Minister Silvio Berlusconi's insistence on elections instead of an interim government threatened to prolong the instability and fanned fears of a split in the euro zone.

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Barry Naughton is Sokwanlok Chair of Chinese International Affairs. He is Professor of Chinese economy, with an emphasis on issues relating to industry, trade, finance, and China's transition to a market economy. Recent research focuses on regional economic growth in the People's Republic of China and the relationship between foreign trade and investment and regional growth.

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