Home / International / Opinion Tools: Save | Print | E-mail | Most Read | Comment
China's precious gift to Europe
Adjust font size:

Europeans are wrong to be angry with China because its currency peg to the US dollar has boosted the euro against most currencies on foreign exchange markets. On the contrary, they should view the currency peg as a valuable gift.

In New York and other American cities, European shoppers are on a spree. They're enjoying first hand the euro's enhanced purchasing power abroad.

The currency peg has also helped make the euro into an important reserve currency, rivaling the dollar. Investments from all over the world are flowing into Europe as a result.

It was predictable that China's currency peg would have this effect. It forced China to accumulate huge amounts of dollars to stabilize its currency and gave the euro an extra boost as the dollar depreciated.

To protect itself from the declining greenback, China and other countries are converting a portion of their accumulated dollar reserves into euros.

The International Monetary Fund estimates that the euro's share of foreign exchange reserves rose to 26.4 percent in the third quarter of 2007 from 25.5 percent in the second quarter of that year and 24.4 percent in the third quarter of 2006.

The euro's becoming a major reserve currency bestows important economic advantages on the euro-zone economy. Europeans should thank the Chinese currency peg for the part it is playing in this.

Of course, with an augmented supply of euros, China can be expected to make substantial investments in Europe, which also is a good thing, especially since, in the United States at least, China has demonstrated a preference for investments in financial institutions rocked by the subprime crisis. Europe has plenty of those.

1   2   3    

Tools: Save | Print | E-mail | Most Read
Pet Name
China Archives
Related >>
- EU trade chief visits China to prepare high-level trade dialogue
- China, EU leading 3rd Industrial Revolution
- China, EU to launch detailed IPR Action Plan
- China, EU sign joint statement to face climate change
Most Viewed >>
> Korean Nuclear Talks
> Reconstruction of Iraq
> Middle East Peace Process
> Iran Nuclear Issue
> 6th SCO Summit Meeting
- China Development Gateway
- Foreign Ministry
- Network of East Asian Think-Tanks
- China-EU Association
- China-Africa Business Council
- China Foreign Affairs University
- University of International Relations
- Institute of World Economics & Politics
- Institute of Russian, East European & Central Asian Studies
- Institute of West Asian & African Studies
- Institute of Latin American Studies
- Institute of Asia-Pacific Studies
- Institute of Japanese Studies