This is a historic moment for the eurozone. The sovereign debt crisis has put European monetary union in jeopardy and called into question the sustainability of the European project. Given the economic and political weight of the eurozone, the crisis has the potential to match the damage wrought by the 2008 US financial crisis on the global economy. So China should welcome last week's agreement in Brussels and, in advance of the G20's meeting this week in Cannes, consider using its wherewithal to lend a supporting hand.
Europe is China's largest trading partner and China is Europe's second largest trading partner. Their bilateral dealings were valued at €363bn last year. In 2009, the onset of global recession cut China's exports to the EU by 15.6%, resulting in a sizable surge in unemployment and factory closure in southern China. A deep financial crisis in the eurozone and the resulting reduction in spending would be felt particularly strongly in export-oriented provinces in southern China. To the extent that a supporting hand from China can contribute to a creditable resolution of the sovereign debt crisis and limit its negative impact on economic growth in the eurozone, there is little reason for China to stand on the sidelines.
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