BEIJING Chinese Premier Wen Jiabao raised hopes in Europe when he pledged to consider deepening Chinese participation in European bailout funds, but there is little indication that China is prepared to go out on a limb with a direct contribution.
China will likely choose instead to play it safe by going through the International Monetary Fund, in part reflecting disagreement among government interests over how to respond to the crisis, analysts said.
Wen told a joint press conference with visiting German Chancellor Angela Merkel that China was "considering increasing its participation in the solution of the European debt crisis through the channels of the EFSF and ESM", referring to the euro zone's temporary bailout fund and its permanent replacement, but later added it would research doing so via the IMF.
His remarks briefly strengthened the euro. German diplomats portrayed it as the most explicit commitment to date by China, raising the prospect Beijing might even contribute directly to the funds, although Merkel was more cautious in her public remarks.
"There is no domestic consensus on how to address the European problem," said Zhao Xijin, deputy director of the Finance and Securities Institute at Renmin University.
"Going through the IMF is playing it safe. From the foreign policy point of view, from other points of view, no further discussion is needed. China is already a member of the IMF and it is prepared to take on the responsibilities of membership."
The IMF wants an additional 500 billion euros in funding to help countries deal with the fallout from the euro zone debt crisis. Some of its biggest funders have balked at putting up more money, saying Europe should do more to help itself.
One critical step would be getting final approval for the 500 billion euro European Stability Mechanism, a permanent rescue fund due to become operational in July that will replace the temporary the European Financial Stability Facility, which was used to bail out Ireland and Portugal and will help in the second package for Greece.
For Europe, China's direct support of its funds would be a welcome vote of confidence from outside the bloc as well as increasing the amount it could draw on directly. IMF funds could be applied to any future crisis, not necessarily in Europe.
Going through the IMF is in line with China's foreign policy priority of increasing its involvement, and voice, in multilateral organizations, said Zhang Haibin, director of International Organization Studies at Peking University.
"China has a lot of foreign exchange reserves but little experience in using them. Finance is a very technical field and China doesn't have a lot of expertise," he said.
"Going through the IMF China can gain experience, drawing on their long experience dealing with these sort of issues."
Chinese popular opinion is also strongly against bailing out Europe, whose $32,100 per capita GDP is about four times that of China.
"There's some truth in this popular view," said Zhao, the finance professor.
"But from the government's point of view, globalization and economic integration means that countries are increasingly tied together. Help is needed or China could also be dragged down."
The Ministry of Foreign Affairs and Ministry of Commerce are deeply worried that fallout from Europe could hurt China -- the European Union is China's biggest export market -- and advocate doing something, he said.
Meanwhile, the agencies in charge of directly managing China's reserves are acutely aware that they will be criticized if China loses money.
They were jeered after China's first direct investments promptly lost value during the initial stages of the global financial crisis. With ratings agencies threatening further downgrades in Europe, they are hesitant to take that risk again.
For the foreign ministry, acting through the IMF sidesteps any diplomatic difficulties later about whether and how to act in future international bailouts.
In particular, Chinese diplomats want to avoid potential future comparisons, internal or external, over China's behaviour towards its new economic partners in the West versus its traditional allies in the developing world.
And more IMF involvement will also increase China's say in that organization, part of a long-term effort to make its weight in multilateral organizations proportionate to the size of its economy and population.
(Additional reporting by Andreas Rinke; Editing by Ken Wills and Alex Richardson)
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