BEIJING, Dec 2, (Agencies): Europe cannot expect China to use a big portion of its $3.2 trillion foreign exchange reserves to rescue indebted nations, a top Chinese foreign ministry official said on Friday, Beijing’s strongest rebuttal yet to suggestions it should bail out the euro zone.
Vice Foreign Minister Fu Ying said at a forum that the argument that China should rescue Europe does not stand and that Europeans may have misunderstood how China manages its reserves.
She did not explicitly rule out using part of China’s reserves for more targeted measures, but implied China was not going to ride in with a big chunk of its “savings” and bail out crisis-stricken Europe.
“We cannot use this money domestically to alleviate poverty,” Fu said. “We also can’t take this money abroad for development support.”
Economists estimate that Beijing has already invested a fifth of its reserves in euro assets.
While the size of China’s reserves is the largest in the world, analysts say two-thirds of that is locked up in dollar assets that cannot be sold, giving Beijing a more modest portion of about $470 billion to invest each year.

Fu said China’s reserves are akin to the country’s savings and that the 1997 Asian financial crisis taught Beijing how important reserves are to the nation.
China’s Foreign Ministry does not exert direct influence over how the country invests its foreign exchange reserves but can comment on that policy.
Fu said Beijing’s refusal to use its reserves to ease Europe’s debt woes does not count as a lack of support for the region, which is also China’s biggest export market.
“I say the idea that China should save Europe does not stand. What I mean is the money cannot be used this way,” Fu said.
“China has never been absent from any international efforts to help Europe. We have always been an active participant, and a healthy particpant as well.”
As the owner of the world’s largest foreign exchange reserves, China is one of the few governments with pockets deep enough to buy a sizeable portion of European government debt and help pull the region from its economic malaise.
Proponents of this argument say China helps itself when it helps the euro zone as it allows Beijing to diversify its reserves from the dollar, and foster economic growth in China’s biggest export market.
But China has been cool to such propositions and has not committed publicly to contributing to Europe’s bailout fund, despite being courted by the fund’s chief last month.


TOKYO: Investors in Tokyo will focus on a European Union summit next week after fears over the eurozone debt problem were temporarily eased by the joint action of central banks, analysts said Friday.
In the week to Dec 2, the benchmark Nikkei 225 index at the Tokyo Stock Exchange gained 5.93 percent, or 483.74 points, to 8,643.75.
The Topix index of all first-section issues rose 5.31 percent, or 37.54 points, to 744.14. “Investors are monitoring the EU summit next week and the monetary policy meeting by the European Central Bank before that,” said Masatoshi Sato, strategist at Mizuho Investors Securities.
Ahead of a critical week for the euro, French President Nicolas Sarkozy declared that France and Germany will push for a new European Union treaty to impose tough budgetary discipline on the debt-ravaged eurozone.
All 27 European leaders will meet at the EU Summit in Brussels on December 8 and 9, a meeting which some observers have billed as their last chance to restore the credibility of eurozone economic governance.

Mizuho’s Sato said the time is short for European leaders to come to a resolution even after the joint action by six major central banks which moved to pump liquidity into the global financial system.
“They bought some time by taking the joint action, but they have only one week before the summit,” Sato said. “I am pessimistic that they could make a decision, something they have failed to do for a long time.” Mitul Kotecha, strategist at Credit Agricole, told Dow Jones Newswires: “The central bank action has bought some time for EU leaders and the euro.
“However, patience will thin quickly and if a significant announcement is not delivered by the time of the EU summit at the latest the euro will come under pressure once again.”
Nevertheless, Sato said he believed Japanese shares will be stable next week.
He said he expects the Nikkei index will be rangebound between 8,400 and 8,800, which he called “a zone where investors feel comfortable.”


SEOUL: South Korea’s central bank said Friday it has increased the amount of gold it holds as it moves to hedge against global volatility caused by European and US debt crises.
The Bank of Korea said it bought 15 tons of the precious metal from the London gold market last month, bringing its total reserves to 54.4 tons at the end of November.
It is the second time it has bought gold to diversify its foreign exchange reserves this year. It purchased 25 tons of gold between June and July — its first purchase since the 1997-98 Asian financial crisis.
The bank said its gold holdings account for one percent of its foreign-exchange reserves, which stood at $308.63 billion at the end of November, the eighth largest in the world.
“Demand for gold is increasing as a hedge against global inflation amid the persistent sovereign-debt crisis in Europe,” Lee Jung, head of the bank’s reserve-investment strategy team, said, according to Dow Jones Newswires.

“The gold purchase will help us cope with volatile global financial markets and enhance investor confidence in Korea in times of crises.”
Asian governments have become increasingly concerned about the problems in the West, with European leaders struggling under the weight of a crippling sovereign debt crisis that threatens the end of the eurozone.
And in the United States lawmakers have been unable to agree a plan to bring down the country’s titanic deficit, which sits at more than $15 trillion.
The ongoing woes has led to forecasts of further gold purchases, especially from Asia.
Gold has become increasingly attractive to central banks worldwide, and prices have risen sharply since the global financial crisis as it is considered a safe haven while a weaker dollar makes it even more attractive.