December 5th, 2011
04:29 AM GMT
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Hong Kong (CNN) – There are a lot of critical meetings scheduled this week in Europe, and Asia is watching.

There's no more talk now of financial decoupling from developed economies. The global economy is tightly interwoven and as Yonghao Pu, chief investment strategist of UBS Asia Pacific, frankly says, "At the moment, we (Asia) are kind of a hostage to what's going on in Europe."

We're seeing the weakness in the global economy force China's hand.

Beijing recently relaxed capital reserve requirements of its major banks after already loosening requirements for some rural banks. This was to make it easier for the banks to make loans and to partially offset the ripple effects of the global economy.  China's latest PMI data have shown manufacturing contracting because of reduced demand. Europe is China's biggest export market. If Europe goes into a recession, Asian exports will certainly suffer a huge dip.

But Beijing reiterated this weekend that if the eurozone is looking for a superman to save it, China is not the place to look.

“The argument that China should rescue Europe does not stand, as reserves are not managed that way,” Fu Ying, China’s vice minister for foreign affairs, said in comments reported by the state news media. China has the world’s highest level of reserve foreign currency - some $3.2 trillion.

Still, a huge amount of bank loans in Asia actually originates from Europe. "The negative news on Asia is that European banks are big lenders. We're talking $1.3 trillion of lending from European banks into Asia," Garry Evans, HSBC's Global Head of Equity Strategy, told me last week.

"If we see a credit crunch in Europe - the banks not able to lend so much - then they're going to pull out lending from Asia first rather than from home companies."

Evans also makes the point that Asian stock markets depend heavily on foreign investors. If European investors start to sit on cash instead of trading equities, money will flow out of Asia.

While Asia is in a better financial position than Europe, it's very much exposed to the cracks we're seeing in the eurozone.



soundoff (31 Responses)
  1. Observer

    Nah China's not worried, she's just concerned with having less money to make. But the west really need to learn to be humbler if they want to ask China for help.

    December 5, 2011 at 6:17 am |
  2. Hans Smallegoor

    Poor China and other Asian countries. Now we in Europe are in some financial trouble we are inable to buy so much from them anymore so they are not getting as filthy rich from us as they used to. But nooo, don't expect any sympathy from them, let alone financial asistance. At least we are getting to see their true faces now, especially from China...

    December 5, 2011 at 8:23 am |
  3. James

    I personally think Asia should go ahead and allow Europe to collapse entirely, even if they are a main importer. The west is trying to suck in Asia into their debt problems, its a an attempt by bankers to destroy the global financial system followed by a takeover

    December 5, 2011 at 8:44 am |
  4. Washington

    Europe. they are doomed to fail,
    they are just ants and this is a world that do not pity the weak.
    their shot at being independent and regaining their glory, but they failed.
    too bad, maybe next world will be better for them

    December 5, 2011 at 9:27 am |
  5. lagrange

    @ Hans Smallegoor EU average income is 10-20 times of Chinese. Why should Chinese government spend money on the rich, rather on it's own people, to provide at lease some food, some basic education and healthcare? EU has a lot of rich people and companies, let them pay their fair share, not the poor Chinese.

    December 5, 2011 at 10:04 am |
  6. km

    No, Hans Smallegoor, it is not the poor Chinese and other Asian countries who are asking for pity. Rather, it as the poor Europeans who are asking for pittance because they can longer enrich themselves through loot and plunder of others resources.

    December 5, 2011 at 10:05 am |
  7. Hans Smallegoor

    @km: Interesting you would mention loot and plunder of resources. Let's consider the situation China is in today. They have financial reserves of $3.2 trillion so my first question would be why is China so rich but are most Chinese so poor? Does that sound fair to you? If China was to spend all that money on providing its people a better quality of life instead of putting pressure on the west and building mega-projects nobody is interested in, they wouldn't be rich at all. So don't bore me with stories how well China is doing and how bad Europe is. Furthermore, considering the looting, any idea how big the presence of China is in developing countries trying to get their resources before we do? Very scary if you ask me. They may be paying for those resources but despite all their money China doesn't care one bit about other people and other nations. Heck, they don't even care much about their own people...

    December 5, 2011 at 10:41 am |
  8. Scottish Phil

    Re; Hans Smallegoor, in total agreement with your statement, the Chinese as a nation are cruel with not much regard to the welfare of their own & others'. I hasten to add that that is not to say that the Chinese ex-pats i call friends who are scattered across the globe can be labelled thus but the race, as a whole, are very big on thinking & planning long-term, you only have to look them getting 1one of the biggest banking centres (Hong Kong) in the world, handed to them on a plate after a 100 year wait.

    December 5, 2011 at 1:53 pm |
  9. Observer

    @Scottish Phil,
    If you've read history, the British took Hong Kong as a result of the opium war, when they tried to enslave China with opium as payment for their much more valued commodities of teas, silk and porcelains back then. It was China's property all along and they never 'planned' it considering how could you plan on something if you have no control over it. I'd say consider Hong Kong as retribution for what the brits did to China.

    December 5, 2011 at 2:21 pm |
  10. That'snotTrue:[

    @Scottish Phil
    Yu never passed your fifth grade history class?
    Enlighten yourself with knowledge.
    And as for the Euro crisis, there's no reason for Asia to bail them out. Just get the richest european mutinational corporate owners to do that.
    Euro zone failed because they spended more than they have, now its time to tighten their belts, and wallets.

    December 5, 2011 at 8:42 pm |
  11. lagrange

    @Hans Smallegoor 3.2 trillion divided by 1.3 billion, that hardworking earned money by every Chinese saved at central bank. Not government money. Learn some basic then start talking. So, when US start killing innocent Pakistani's soldier, you called it for anti-terror, when US buying resource from Mexico, using printed money, you call it fair; just China use their hardworking earned money to buy something, you call it a threat? Because it's a threat to the current western dominant system? Where you can say and do whatever dirty work you want under the name of democracy and justice.

    December 5, 2011 at 9:15 pm |
  12. u mad

    there is definitely an ostrich involved

    December 6, 2011 at 12:25 am |
  13. Strangewalk

    The world financial system resembles a ramshakle old building on the verge of collapse that should have been condemned long ago, but is now desperately being held up by bailing wire and super glue. When the inevitable does happen, it is possible that one wall or beam will remain standing a little longer than the rest (China?)–but without the remaining support structures the whole thing, in its entirety, will most certianly come down. The whole thing–most certainly.

    December 6, 2011 at 2:29 am |
  14. Rob

    It all sounds like a huge shell game. Italy, Greece, Spain, Portugal, Ireland, and even the USA need to be allowed to fail. Socialist policies and extreme capitalism don't mix. Only after a collapse will these countries learn to live within their means.

    December 6, 2011 at 4:23 am |
  15. kpryana

    For a long time we in Asia always envy the "wealthy" tourist from western countries that could live in our country for months while learning that they got "wealthy" by doing part time jobs !!.
    We must work very very hard, has good position and save money to visit western countries even for a brief vacation.
    The "Euro zone failed because they spended more than they have, now its time to tighten their belts, and wallets" is true.

    December 6, 2011 at 4:40 am |
  16. American & Proud of it

    OK – 1st off – let's count how many chinese are posting here... Even the one's who sound somewhat English.. Can I see a show of hands please? see – In the west – we can come here and post if we want too – or not – it is our choice – however – from the posts I have been reading – it's the hard line rhetoric of the chinese (i leave it lower cased on purpose because china is insignificant and without the west and us purchasing their goods – they would still be out in the fields) government that is actually doing the posting here... they put puppets in chat rooms and have them post on places like this – to try and 1. make them look better and 2. try to sound English or American to try and make it seem as though the west is taking a liking to them (the chinese goverment) the people are ok – but the goverment as is all socialist goverments – very paranoid about the west).. Now – let's get to the meat of it.... china depends on the west – more so than the west depends on china – see – we buy stuff from china but china doesnt buy stuff from us.. we also buy stuff from each other (western countries) – where as china pretty much sticks to home – sooo – without us (the west) china is broke... period.... the trad inbalances are staggering and people are waking up and noticing it and soon china and their backwoods thinking will be right back where they started from....

    December 6, 2011 at 7:43 am |
  17. American & Proud of it

    it's funny – sure the west (and the world) is having financial problems.... if you look at nations and their GDP's – well there is one that stands heads, shoulders – heck (gotta keep it clean for the mods) – pretty much to the waistline above the rest and that is America... if you combine the 17 nations of the EU together – they beat America out – but you have to combine 17 nations to do it... BUT – Kudos to them!! now – you add those 17 nations together and America – what do you have – an unstoppable force... more than 30 trillion in GDP's – that is half (the world GDP is around 65 trillion) of the world's GDP and we are only talking about 17 of the western countries – so – china needs to be careful how they play – because we here in the west can easily step on that ant hil and their meesily 5 trillion GDP – which the vast majority is tied to us (the west) buyin their goods.....

    December 6, 2011 at 7:49 am |
  18. made in china

    Say what you like American, it's your top 1% industry players that move all your jobs to china. You guys were screwed by your own kind. Don't want to buy from china? fine prepared to pay double for your ipads. And you americans still complain about the price of things, sheesh

    December 6, 2011 at 12:25 pm |
  19. American & Proud of it

    I knew I would draw someone out.... your right – and I would pay more.. as far as being screwed by the top 1% – naaaaa – not really – see – that is what the media would have you believe.. it's actually the socialism politics that has screwed us... now – you are really screwed because you have been riding the Hong Kong wave for a while now and that wave is about to hit the beach.. see – you were still in the fields until the UK gave Hong Kong back to your country... I mean – Hong Kong itself was i think around the 3rd or 4th largest economy at the time – so – you added that piece of capitalism into your portfolio – however your communist (evil) government has been tightening their control over Hong Kong for years – trying to mesh it into the piece of crap government you have there in china but in doing so – has caused Hong Kong's might to fall... and well – like I said – that wave you have been riding is about to crash onto the beach and you will have nothing but an empty hull of a once mighty ship... see – communish and socialism doesnt work... it never has and it never will... in theory – it is the "perfect" system – however – in practice – you have this thing called human beings and well – the one's on the bottom rung of the ladder have to have the ability to climb that ladder or they eventually give up... that is where domcracy and what we have in America have (a republic) comes into play – it's not perfect – but in practice – it works because the little guy can become a great individual.. you dont have that in china....

    December 6, 2011 at 5:57 pm |
  20. @American& Proud of it

    You sir, sound like the real TROLL, who is dillusional about his own country's affairs while thrown stones when your in a glass house. No wonder America's falling.... if you can't face you own problem, how can you tell other people how to solve their's.
    BTW commies= ecil sound like you're stuck in the 1950s.... or don't know what communisim really means.

    December 6, 2011 at 7:24 pm |
  21. American & Proud of it

    and you sir or ma'am are not very good at hiding where you are from – though your attempt was decent..

    December 6, 2011 at 9:09 pm |
  22. Australian

    Oh get over yourself, you are not the center of the universe USA. Times changes, and the moment you realise that and move on, that is when you can actually think about how to claw back your market from the Chinese.

    December 7, 2011 at 4:33 am |
  23. American & Proud of it

    Australian – you really don't sound Australian... However – you are right – way too much of our debt is owned by the chinese.. I lbame the politicians for that...As far as our market – please – our economy is still growing – just at a smaller pace... our jobless rate (though reported as 8.6%) is double digits – but that is much lower than most countries.. iin the past year our GDP has grown from 14.5trillion to 14.9 trillion – and let's put this into terms everyone can understand – though .4trillion isnt a great deal when your adding it to a number like 14.5 – however – compare it to china or any other countrie's GDP and well – it's actually a pretty large numbere... I mean – that's almost 10% of china's GDP and they (though 1/3 of what America's GDP is) are the 2nd largest economy in the world... Look – don't kill the messenger – I'm only giving numbers that are out there for anyone to see... It's like what I have said in the previous 4 posts – I'm not gloating or bragging – that's not the intent of anything I have said so far – my point is and has been from the get go is that – china isnt "all that" (American slang – look it up if it baffles you).. if you look at the posts in here (including the one that says the user is "Washington" – the person is posting with a very distinguishable Asian (not all Asian countries are insignificant – just 2 in my book) "accent"... they (the chinese) are raping every single country out there.. they have millions of government sacntioned hackers (8 million reported by CNN) trying to gain access into virtually every countries government and public networks... so dont think for a minute that it's beyond the realm of possibility for them to place people in places like this ti try and improve their image or sway public opinion in their favor... Another thing the chinese are donig that I wish the American companies (and every company for that does business through them for that matter) would figure out is – they are stealing our trade secrets... we award a contract to a chinese company to build something for us and they do it – however – they now have the tech specs for it and set up a factory next door to "ours" and start making the same exact thing under a different name or they make a run for our company and when all those orders are complete – then they make another run to sell on the black market... They do not play by anyone's rules but their own... They don't have to do any R&D for anything – because all the other countries in the world are just handing it to them – they don't have to sweat and bust their butt to develop anything – again – it's being given to them... They (the chinese) are just poor immitations of what the west has and they want to be – but will never ever achieve it...

    December 7, 2011 at 5:42 am |
  24. American & Proud of it

    and let me set this straight – the chinese people are a very good people.. it's the government and it's practices that I have a problem with... their human rights violations are rediculous.. there is no free speach in china... they censor anything that is against the government.. the government controls everything and the people are the one's who suffer.. about 6 months ago (july) there was a train crash in china – and they (the chinese government) had the audacity to one say it didnt happen to begin with and then sent workers to the site – not to help the people who were hurt, in the dark and trapped – but they started burrying the train cars that fell off the bridge they were on... they were doing this all the while people were still trapped in the cars above... they didnt acknowledge what had happened until pictures started showing up on youtube and twitter... this is how the chinese government reacts to everything – they act like teenagers – rebellious teenagers... it's really wild to sit back and watch them react to anything.. they make cheap and shoddy stuff – they things that are contaminated with lead and other hazardous chemicals coming out of china is rediculous... i read where one company was making dumplings out of cardboard – they do not act sane....

    December 7, 2011 at 5:55 am |
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