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Effects of the debt crisis on the EU-China relations

Author

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  • Mező, Júlia
  • Udvari, Beáta

Abstract

The economic (debt) crisis has become serious in the EU and in the Eurozone especially in the last few months. The European Financial Stability Facility (EFSF) was created as an instrument to handle this situation. But the financial contributions of the EU Member States seem not to be enough and China appears as a potential contributor. It is often cited that China offered Portugal and Spain in March 2011 to support their crisis management. However, recently, there are attempts from the side of the EU to convince China take part in the EFSF. Thus the question raised often in Europe is the following: Will China contribute to the EFSF? If yes, what conditions will the country raise? What are the arguments of the Chinese capital both in China and the EU? Consequently, our research is focusing on the impacts of the global financial and economic crisis on the new relations between the European Union and China. China’s enormous reserves enable the Asian financial assistance to European countries in crisis management but there are a number of questions related to this. The main findings of this study are that China can benefit from its European crisis management from many aspects, as the EU is the largest market for the Chinese products. Furthermore, reserve currency diversification and political considerations cannot be neglected, either. But the assistance may have serious risks for China: not only the expected return on investment is at a stake, but internal social and political tensions can emerge from helping the Europeans who still live in significantly higher wealth than most of the Chinese people. Adopting Chinese capital raises questions for the European Union, as well. China may impose such terms by which the EU may become vulnerable and get into a dependent position, then presumably it will be difficult to solve the cooperation.

Suggested Citation

  • Mező, Júlia & Udvari, Beáta, 2012. "Effects of the debt crisis on the EU-China relations," MPRA Paper 40367, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:40367
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    File URL: https://mpra.ub.uni-muenchen.de/40367/1/MPRA_paper_40367.pdf
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    References listed on IDEAS

    as
    1. Charles Wyplosz, 2010. "The Eurozone in the Current Crisis," Finance Working Papers 22825, East Asian Bureau of Economic Research.
    2. Dabrowski, Marek, 2010. "The global financial crisis: Lessons for European integration," Economic Systems, Elsevier, vol. 34(1), pages 38-54, March.
    3. András Inotai, 2011. "After the Crisis?," Public Finance Quarterly, State Audit Office of Hungary, vol. 56(3), pages 360-378.
    4. Karin Kondor & Karsten Staehr, 2011. "The impact of the global financial crisis on output performance across the European Union: vulnerability and resilience," Bank of Estonia Working Papers wp2011-03, Bank of Estonia, revised 13 May 2011.
    5. Carmen Valentina RaDULESCU & Ildiko IOAN, 2009. "Economical Crisis And The European Union’S Cohesion Policy," Management Research and Practice, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 1(1), pages 62-67, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    European Union; debt crisis; China; crisis management;

    JEL classification:

    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • H1 - Public Economics - - Structure and Scope of Government
    • G01 - Financial Economics - - General - - - Financial Crises

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