As Greek elections on June 17 come closer and the world’s financial agencies are not certain what plan is more possible – exit or remaining in the Eurozone – the EU, the IMF and many powerful countries around the world are preparing for every development that may occur. The Chinese government has called on key agencies to come up with plans to deal with the potential economic risks of a Greek withdrawal from the Euro zone.
Three sources well aware of such matters told Reuters the plans may include measures to keep the yuan currency stable, increase checks on cross-border capital flows and stepping up policies to stabilize the domestic economy.
As investor concerns over Greece’s possible exit from the Euro zone grow, the central government has called on related state agencies, including the National Development and Reform Commission, the central bank and the banking regulator, to discuss contingency plans, the sources said.
“The government has asked every department to analyze measures to cope with a Greek exit from the Euro zone and make their own suggestions as soon as possible,” said one of the sources and added that such actions are “very urgent.”
Late last month, Premier Wen Jiabao warned at a state council meeting that “downward economic pressure is increasing.” The government has already announced a raft of measures to support economic growth, which is expected to slide this year to its weakest pace since 1999. These include fast tracking infrastructure and industrial investment projects while distributing subsidies for energy-saving home appliances and cars.
A research chief with a Chinese bank in Hong Kong said that banks are being required by the mainland authorities to hand over a brief on global financial markets every day.
Yu Yongding, an influential economist and a former central bank adviser, said in comments published last week that China should prepare for a Greek withdrawal from the single currency and proposed steps including capital controls to cash injections to domestic markets to reduce volatility.
China’s central bank chief said in comments published on Monday that the country will continue to invest in Euro zone government debt and other assets and urged the single-currency bloc to step up reforms to stem its debt crisis.
(source: Reuters)
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