Friday 30 Sep 2022 | 14:25 | SYDNEY
Friday 30 Sep 2022 | 14:25 | SYDNEY

Signs of shifting financial power


Mark Thirlwell

16 July 2010 14:47

More evidence of what happens when other countries have the money: Gillian Tett has a piece in the FT arguing that European governments have been paying increased attention to Asian investors. 

Tett notes that, for much of the past year, governments in Berlin, Paris and Madrid resisted the idea of conducting US-style stress tests on their banks, despite encouragement from the likes of the IMF, the BIS and the Obama Administration. What finally got them to change their minds? According to Tett, it was events around the G20 finance ministers' meeting at Busan. More specifically:

In the days before and after that G20 gathering, eurozone officials met powerful Asian investment groups and government officials who expressed alarm about Europe’s financial woes. And while those officials did not plan to sell their existing stock of bonds, they specifically said they would reduce or halt future purchases of eurozone bonds unless something was done to allay the fears about Europe’s banks.That, in turn, sparked a sudden change of heart among officials in places such as Germany and Spain.

Since then, China's SAFE and other Asian investors are reported to have returned to the Spanish bond market. Related:

  • A week or so back, SAFE was reported as pledging that it has no plans to dump its massive holdings of US T-bills, following earlier reports of a shift into JGBs.
  • Michael Pettis argued that, far from dumping its US dollar assets, China is much more likely to be growing them.

Photo by Flickr user Talke Photography, used under a Creative Commons license.