CIC lukewarm on Euro bail-out

The head of China’s $400 billion sovereign wealth fund has offered in principle support for injecting money into the struggling Eurozone but notes any commitment of funds must be an investment rather than a political decision.

In a rare interview with a foreign news organisation, Jin Liqun (pictured), the supervising chairman of China Investment Corporation, told Al Jazeera’s Teymoor Nabili that any potential Chinese bail-out would have to be based on the financial opportunities the deal presented.

“In certain parts of the world some countries could be momentarily in trouble, and that is certainly unfortunate for the particular country,” Jin said.

“But, of course, this also creates some opportunities for investors to come and help them out, which is perfectly alright in my view, and this is for a win-win situation.”

European political and financial leaders have beaten a door to Beijing in recent months, looking for the world’s second biggest economy to inject much needed capital into the debt-laden Eurozone.

Jin made it clear that CIC must be treated as a long-term investor rather than just a temporary source of capital, if the sovereign wealth fund was to provide much-needed capital.

“If the recipient country of the sovereign wealth funds of a particular country would like to welcome capital injection into a particular sector, banking sector or otherwise – which is perfectly alright in my view – the problem, if any, is that the recipient country should treat the sovereign wealth fund fairly, equitably, as any other financial investors,” he said.

“Which means you cannot try to keep them out of the door when you don’t need it and, when you call them in, ask them to do this and that when you need money.”

Jin denied the CIC does the bidding of the Chinese Government, describing the sovereign wealth fund as a passive financial investor, which operates “independent of the Chinese State”.

Jin, who has served as China’s Deputy Minister of Finance and vice president of the Asian Development Bank, described China as supportive of a strong robust European country but noted direct investment was just “one level of support”.

While Eurozone politicians have suggested BRIC countries contribute directly to bailing out Europe, India, Russia and Brazil have indicated they would only contribute through the IMF.

“Buying the bonds of some of the European countries, or whether there should be investment in some of the banks that are threatened by the debt crisis, these are very practical detailed transactions for any potential investors to consider,” Jin said.

“That is why I say there are different levels of support and different levels of involvement, and to be a responsible investor for the government, for the state, any sovereign wealth fund will look at the investment opportunities, which I am sure will be coming up from Eurozone members.”

Jin was also scathing of what he saw as Europe’s welfare state, saying the fund was looking for indications that European leaders were going to make the structural decisions necessary to ensure the long term economic competitiveness of their economies.

“We are upbeat about Europe but in the first instance Europe must be upbeat about itself,” he said.

“Having 17 parliaments and governments will not give Eurozone members any excuse for not taking action – and this is the message.”

He cited in particular the current labour laws in Europe that were an “invitation to indolence”, with some able to retire at 55 while other Europeans had to work well into their 60s.

Jin noted that it would be domestically unacceptable for organisations like the CIC to be seen to be bailing out Europe, if it was perceived Chinese savings were being used to fund wasteful government spending.

“The Chinese people are working very hard to build up our nation to move forward,” he said.

“So, if you say, ‘Hey you know European countries are in trouble why don’t you pull your resources in?’, our people will ask us a question: ‘Wait a moment – are you sure you can get a fair share of returns by your investment because this money is the result of the Chinese people who have worked very hard over the past three decades, ever since the reforms were launched’.”