Assets, not bonds, are China’s preferred route

CHINA is more interested in buying European assets than using its sovereign wealth fund to buy bonds in EU countries, despite vague promises made yesterday by premier Wen Jiabao at a meeting in Beijing with European Council president Herman Van Rompuy and European Commission president Jose Manuel Barroso.

Mr Wen said: “China is ready to increase its participation in resolving the European debt problems. We are willing to conduct close communication and co-operation with the EU.”

Earlier this week, the head of China’s $410 billion sovereign wealth fund said Germany had asked it to buy European government debt earlier this month, but such investments were “difficult” for long-term investors.

Lou Jiwei, chairman of China Investment Corporation, which recently bought 9 per cent of Thames Water, said any fresh injection of funds into Europe would be in industrial and other real assets, not government bonds.

Beijing views European bonds as a poor investment, and thinks assets are more profitable. However, this means that the Chinese state – as China has no truly independent companies – is building stakes in some primary EU assets.