Wen's visit to set tone for more debt purchases by China

Though the specter of a Greek default and a weak euro continues to loom over Europe, Chinese Premier Wen Jiabao's three-nation visit starting this week is likely to create more opportunities for cooperation.

Wen's visit to Hungary, Britain and Germany is also being viewed as important in economic circles as a struggling Europe is now increasingly looking to Beijing to play an important role.

Though China has in the past indicated its willingness to help European economies overcome their debt-driven crises, there are indications that the nation may want more assurances for future cooperation and asset security before it starts buying more European debt.

"The Greece issue will figure prominently on Wen's agenda," says Men Jing, a professor at the College of Europe in Belgium.

Wen's European trip incidentally coincides with the two-day EU summit that aims to find a solution to the eurozone debt crisis.

China has been buying bonds from Spain and other European nations since 2009 when the debt crisis started in Europe, says a recent statement from the commerce ministry.

With hardly any signs of the debt crisis ending or the investment climate improving, analysts have often indicated that China should tread the European path cautiously especially as the default risks are high.

China's sovereign wealth fund, the China Investment Corporation, also holds a bearish outlook on the European economy. But the fund indicated in April this year that it would continue to invest in Europe.

"I think he (Wen) will be more concerned about the sovereign debt crisis in Europe and especially the risk of a Greek default as it could also affect the future of the euro and the European economy," says Hugh Miall, professor of international relations at the University of Kent.

"China already has sizable holdings of US debt and now looks keen to add European debt," he says.

Gu Junli, a scholar on European studies with the Chinese Academy of Social Sciences, says that though Beijing is not sure where the European debt crisis is heading, it appears keen on helping find a solution.

"China has made it clear that it wants to see a strong euro," Gu says, partly because it also wants to balance the role of the US dollar.

But the real fulcrum on which China is basing its European strategy is to forge stronger linkages, he says.

Men says that Wen will also use the trip to push for a lifting of the arms embargo and granting China market-economy status.

The Chinese foreign ministry has however played down both these issues when it announced Wen's visit last week. Deputy Foreign Minister Fu Ying recently indicated that China will get the market-economy status automatically in 2016 according to WTO regulations and hence Beijing's current bid for the status is mainly to seek fair treatment.

Hungary holds the current EU presidency, while the UK and Germany are key EU members. Wen is also likely to discuss challenges facing North African and Western Asian nations during his visit, Men says.

China has of late been bolstering its relations with Europe with frequent high-level dialogues and visits. Wen is the fourth Chinese leader to visit Europe in the last six months.

President Hu Jintao recently wrapped up a visit to Russia and Ukraine and will visit France in November to attend the G20 summit. Vice-President Xi Jinping visited Italy earlier this month while in January this year Vice-Premier Li Keqiang visited Spain, UK and Germany.

"I have never seen such a high frequency of top-level visits from China to Europe before," says Monika Hohlmeier, a member of the European Parliament.

China's active approach indicates its confidence in playing a bigger role in solving the tough global challenges and also the country's sincerity in deepening relations with Europe, she says.

Hohlmeier says China has been participating in the changing global financial market and these interactions will help improve global financial governance.

"China's growing role in the governance framework and internationalization of the renminbi should be one of the most exciting things we can see in the next 10-20 years," she says. "It is a challenge for China and for the world as well."

Zhong Nan contributed to this story.