하나은행 하나금융연구소

■ Amid worsening budget crisis in the euro area, there's an expectation that China may play a more active role in international coordination.

■ Since the financial crisis, China and Europe have further enhanced their economic ties with more trade and investment.

● Europe emerged as the largest export destination for China, which will make Chinese external transactions far more vulnerable if the euro crisis is further aggravated.

● As such, since the crisis broke out in 2010, China offered practical assistance by purchasing european government bonds and expanding its investment, and this time, it is also expected to play a significant role in calming the European economic storm with practical assistance.

■ China's dilemma in buying more european government bonds

● If a dollar-driven single world currency system is given more weight fueled by the euro crisis, the Chinese yuan may suffer uncertain international status.

● Given its economic gains and international status, China is not likely to ignore the malaise in Europe, but the country may not afford any more investment in european government bonds, given its foreign currency reserve balance and potential impact from large-scale selling of US Treasuries.

■ With a limited possibility of european government bond purchase , non-government bond and real investment are more likely.

● China may take a two-tiered approach of keeping its current investment in some risky government bonds and selectively buying more government bonds with solid credit rating.

● At the same time, the country is expected to continue to stick to the post-2010 strategy of raising its non-government bond investment in Europe, while boosting its real investment and exports in the euro area.

■ China may take countermeasures to shield itself from impacts of the European fiscal crisis.

● Although some demand for easing austerity measures in China to prevent potential global economic recession, there is a cautious stance, considering higher global liquidity enabled by policy coordination.

● Also, with massive capital inflow into China expected as Chinese or hot-money investors withdraw their investment from Europe, tougher measures may be required on foreign direct investment and foreign currency management.