China is considering deeper involvement in the euro zone's bailout funds, Chinese Premier Wen Jiabao said Thursday, the strongest public indication yet that China may marshal its massive foreign-exchange reserves to help alleviate the Continent's sovereign-debt crisis.
But he fell short of offering firm commitments to increase China's investment in funds intended to bail out heavily indebted euro-zone countries, and also stressed that Europe needs to address its own problems.
China is considering "involving itself more deeply in" the efforts to address the crisis through channels like the European Financial Stability Facility and the European Stability Mechanism, Mr. Wen was quoted as saying by state media.
He made the comments during a state visit by German Chancellor Angela Merkel, who in a speech earlier Thursday pushed for tougher action against Iran to contain its nuclear program and against Syria as it violently cracks down on protests. China has opposed new measures against both.
Separately, state media quoted Mr. Wen as saying that "Europe's own efforts are the foundation and the key to resolving the crisis." China has confidence in the European economy and the euro, and supports efforts to stabilize the euro, he said.
China also supports the International Monetary Fund and other international financial institutions taking a major role in resolving the crisis, Mr. Wen said. Chinese state television said that Ms. Merkel thanked Mr. Wen for China's "valuable support" and said that Germany welcomes additional investment by Chinese companies.
China has long been a buyer of bonds issued by the EFSF, although the exact amount of purchases hasn't been publicly disclosed. But when European officials proposed in October to boost the fund's firepower by leveraging it and attracting additional foreign funds, Chinese officials reacted cautiously, saying they needed more details on the proposal before committing funds. At the time, Chinese officials also expressed a preference for contributing through international channels such as the IMF.
In his comments on Thursday, Mr. Wen added, "China is investigating and evaluating ways, through the IMF, to be more deeply involved in solving the European debt problem via ESM/EFSF channels." It wasn't clear whether that meant China would reject additional EFSF purchases outside the IMF channel.
The proposal to lever-up the EFSF has since failed to gain significant traction, but European officials are now considering combining the bailout fund's firepower with that of the ESM, a permanent successor to the EFSF that is due to launch this summer.
The ESM is planned to have a capacity of about €500 billion (roughly $655 billion), while the EFSF is thought by analysts to have a remaining capacity of around €250 billion.
Some analysts have speculated that China may demand concessions from Europe on political or trade matters in return for committing additional funds, but there was little evidence of any such compromise by Ms. Merkel during her visit to China.
Earlier on Thursday, in a speech before China's main state think tank, Ms. Merkel addressed head-on two major current points of contention between China and Western nations: Iran and Syria. On Iran, Ms. Merkel said "we need sanctions as one possibility for trying to get Iran to change course," citing the failure of diplomatic negotiations in recent years. She accused Iran of "not acting transparently."
China, along with India, has defied pressure led by the U.S. to curtail oil purchases from Iran and take other measures over concerns that it is developing nuclear weapons. Iran has denied the accusation, saying its nuclear program is peaceful. China previously backed U.N. sanctions on Iran and has called for an easing of tensions in the Persian Gulf region.
Ms. Merkel also alluded to China's opposition, along with Russia's, to measures in the U.N. Security Council to punish Syria for its crackdown on political opponents.
"In Syria, human rights are being violated in a dramatic fashion," Ms. Merkel said. "During our trip here, I will certainly speak with various representatives of the political leadership of China about how we can agree on more on this issue. The Arab League has played an outstanding role in this matter. I think the U.N. Security Council ought to find clear words here."
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