PBOC’s Zhou Says It’s ‘Too Early’ to Decide How to Aid Europe

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September 24, 2011, 7:12 PM EDT By Belinda Cao and Aki Ito

Sept. 24 (Bloomberg) -- It’s “too early” to determine how emerging economies can further help the euro area overcome its sovereign debt crisis because reforms are still under way, China’s Central Bank Governor Zhou Xiaochuan said today.

“We need to first see if euro-zone countries can implement their July 21 decision,” Zhou told reporters at the International Monetary Fund in Washington today, referring to a pledge by European leaders to expand the powers of a regional rescue fund. He doesn’t expect Greece will default on its debt and anticipates Europe will be able to overcome its crisis through reform, he told reporters.

Group of 20 finance chiefs pledged coordinated efforts to tackle rising risks this week as Greece teeters on the brink of default and stocks around the world plunged. Attention has focused on the potential for emerging economies to aid Europe as Japan and the U.S. tackle their own expanding debt burdens and sluggish growth.

“Some are studying and proposing to increase the size of the EFSF,” Zhou said today, referring to the European Financial Stability Facility. “That needs to be done by the European countries.”

Chinese Central Bank Deputy Governor Yi Gang said this week that the “real solution” to Europe’s woes must come from within the region, while noting that the world’s second largest economy can help Europe “at the margin.” Addressing whether China Investment Corp. will buy euro-area bonds, Vice Chairman Gao Xiqing said in a panel the company can’t be a “savior” of others because it must keep a certain level of profitability.

Chinese Inflation

Separately, Zhou told reporters today that the People’s Bank of China has no “immediate” ways to control inflation because it takes time for monetary policy to affect prices. China’s consumer prices rose 6.2 percent from a year earlier in August following a 6.5 percent advance in July that was the biggest since June 2008.

Zhou added that he’s watching inflation “very closely” and that China will continue to increase the flexibility of the yuan. Markets will determine whether the Chinese currency will be included in the IMF’s Special Drawing Rights system, Zhou said.

--With assistance from Alaa Shahine in Washington. Editors: Paul Badertscher, Kevin Costelloe

To contact the reporters on this story: Belinda Cao in Washington at lcao4@bloomberg.net; Aki Ito in Washington at aito16@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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