With the overriding focus on the eurozone, some positive news from China had less impact than might normally have been expected. Data showed that the country experienced its biggest fall in inflation since early 2009. This looked enough to allow authorities to ease both monetary and fiscal policy – a good move for encouraging growth, which currently stands at 9.1%. So, with China doing well in relative terms to the eurozone, where is the aid that was suggested some weeks ago? According to independent sources in the Chinese government, it is tied up in a political deadlock after Europe spurned all of Beijing’s demands. According to the sources, Beijing wanted either more influence in the International Monetary Fund, market economy status in the World Trade Organisation, or the lifting of a European arms embargo. With this political impasse, a circa $100 billon cash injection for the eurozone looks unlikely. Of course, China will have to weigh up the fact that without a stable eurozone it may lose its biggest trading partner.
St James’ Place