Don't Count on China Using Reserves for 'Rescue'

There's more interesting stuff from Bloomberg on current efforts to get China to help bail out all and sundry troubled European economies. Particular insights I want to highlight that I've brought up now and again include:

1. The Communist Party is not monolithic. Alike other political entities, there are tensions among various factions;
2. Public pronouncements in particular are contentious, with various ministries vying to be "the last word";
3. With quite some justification, the Party cites protectionism as a barrier to investing in US assets instead of Treasuries and others' sovereign debt.

Here are the relevant parts:

China can’t use its $3.2 trillion in foreign exchange reserves to “rescue” European nations and the country “has done its part” to help the region deal with its financial crisis, Vice Foreign Minister Fu Ying said. “Foreign reserves are not revenues,” Fu, whose portfolio is European affairs, said in a question and answer session following a speech in Beijing yesterday. “It’s not money that can be used by the premier or the finance minister.”

Fu said China can’t use its reserves to fund poverty alleviation at home or to bail out foreign countries. The country learned from the 1997 Asian Financial Crisis that it needs to keep large reserves to maintain liquidity in order to honor obligations, she said.

There remains the issue of your typical American hypocrisy over China being "free" to purchase as much (AA+ and sinking) dollar-denominated sovereign detritus but being unable to invest in American corporations:

China wants to convert some of those reserves into investments in the U.S., Chinese Commerce Minister Chen Deming said separately in a speech to the American Chamber of Commerce in Beijing yesterday evening. China is “willing to convert some of the holdings of debt into investment in the U.S.,” Chen said, without giving details. He also said that the government is also very concerned that a further “festering” of the debt crisis in Europe will affect the nation’s economy.

There's also the problem of "Who Speaks for China?" in these matters:

The Foreign Ministry does not control the country’s foreign exchange reserves, and the ministry’s Fu said yesterday it would have been more appropriate for People’s Bank of China Governor Zhou Xiaochuan to make the remarks, which were in response to a question. Fu is one of six vice foreign ministers, according the the ministry’s website.

Fu also said “now is not the time” for China to have a contingency plan in the event a euro zone country defaults on its debts or exits from the 17-nation single currency. The government has already done its part to help Europe, which has the “wisdom” and strong economic fundamentals to solve its sovereign debt crisis, she said.

I guess the Europeans are on their own in this regard, while the Americans are long overdue on practising what they preach concerning FDI.