It would have been difficult to bet on China coming to the rescue of cash-strapped Europe. Nobody expected a “white knight” to intervene in Europe’s disastrous finances, but China was still unable to burnish its tarnished reputation in the Old Continent by intervening. First Beijing promised aid, then contradicted itself, and now the chance at saving face is probably lost. In the darkest moments of the financial crisis, it seemed natural to look to China for help. The PIIGS countries were on their knees and the danger that they would drag the rest of the Euro area down with them was very real. When Italy’s troubles reached a critical point, it became clear that the crisis was not just a southern European phenomenon.
China’s intervention could have led to strategic negotiations with the power to change global geopolitical aspects. Chinese capital reserves – the largest in the world- could have bought public debt for concrete returns: a European recovery to help Chinese exports, status of “full free market economy,” and a lifting of arms embargoes. The Dragon refused even to negotiate on terms that proved to be too challenging and risky, declining to be a rescuer and hiding behind prudence and disengagement. It was neither a savior nor a committed partner. Chinese intervention was limited to the purchasing of German bonds and qualified industrial assets. In the end, China played it safe, just when it had the chance to take a risk and win big.
More than just hesitation, China’s response was characterized by an inability to articulate negotiations in proportion to its size and place in the international arena. A powerful country should not confine itself to flexing its muscles just to prove how heavy it is, tallying up record after record.
China would have benefited from a dash of vision and pride, capitalizing on its strengths, but instead it squandered a great opportunity by remaining prisoner of its own narrow horizons. Now, a European recovery seems slow but imminent. Not all fears have been conquered, but the danger of a Euro collapse has now passed and Italy, led by a competent government, is playing a pivotal role.