China's country fund, which has an estimated US$ 440 billion in assets, has stopped buying European bonds, accusing European authorities of "lack of leadership" in managing the eurozone crisis. Meanwhile, Asian shares continue to drop as China's economic growth is at risk. If GDP growth declines, social tensions will rise, undermining the power of the Communist party.

Beijing (AsiaNews) - The eurozone crisis and Greece's uncertain economic future could have a negative impact on the economies of China and Asia since Europe is their main export market. The uncertainty has already badly affected European shares, monopolising the attention of European governments. For this reason, the China Investment Corp (CIC) has stopped buying European sovereign debt, blaming European authorities for their "lack of leadership".

For CIC supervisory board chairman Jin Liqun, the latter have been incapable of dealing with the euro area's debt. If Greece exits the single currency bloc, other countries might follow. "Ever since the debt crisis broke out, there has never been a master plan for a resolution," Jin said at an event hosted by the Centre for Policy Studies in London late yesterday.

With an estimated US$ 440 billion in assets, the CIC is the world's fifth-largest country fund. Its president Gao Xiqing said on 9 May that the sovereign wealth fund has stopped buying European government debt on concerns about the region's financial turmoil.

"Too much time has been wasted on endless bargaining on terms and conditions for piecemeal bailouts," Jin said. "You cannot say there is no strategy altogether, but short-termism features prominently in the process for negotiations for bailout." For him, the Greeks should be told to leave or work hard in the next ten years to stay in the euro.

The CIC is in dicey position. China is one of the world's economic engines, but relies heavily on exports with Europe as its biggest export market, accounting for about 18 per cent of the nation's overseas shipments.

Forced to maintain a 7 per cent annual growth rate, China's Communist authorities are afraid of what might come from a collapse of the eurozone, putting at risk €400 billion worth of bailouts so far initiated in the region.

Markets too are pessimistic. In Asia, shares continue their slide, especially of exporters.

In Shanghai, some 7.7 billion shares changed hands yesterday, 14 per cent lower than the daily average this time last year.

The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded US-listed Chinese companies, retreated by almost 1 per cent in New York yesterday.

The Shanghai index has fallen 4.1 percent from this year's high set on March 2 on concern a slowdown in growth at the world's second-largest economy is deepening.

This is a headache for investors but also for the Chinese government, which set a 7.5 per cent growth target for this year.

If things continue as they are however, it will have to settle for 6.8 per cent. This would mean higher inflation and a credit crunch for private investors, with the prospect of greater social unrest.

Even the row over the yuan does not help. Even though China has refused to let it float freely in order to boost exports, it is already on "its way to become an international reserve currency," but it will take "the next 10 or 20 years" before it "will play a more important role," Jin said. "[C]ompared to euro, dollar, it will still be very insignificant".

• china
• europe
• crisis
• economy