MercoPress. South Atlantic News Agency

Greek surprise freezes China’s commitment to the Euro plan

Zhu Guangyao, China's deputy finance minister, “we were also surprised”

China has said it cannot commit to investing in the European Financial Stability Fund (EFSF) until the situation with Greece has been clarified. European leaders hoped that China would buy EFSF bonds, injecting capital in the region's financial markets.

The EFSF was one part of a three pronged rescue plan put together to solve Euro zone's debt crisis. Last week, Euro zone leaders agreed to boost the EFSF capacity to 1tn euros.

European leaders had been seeking investment from China, which has 3.2tn in foreign exchange reserves.

“The fund has not established details of its investment options so we still can't talk about the issue of investing.” Zhu Guangyao, China's deputy finance minister.

Last week, Klaus Regling, the chief executive of the EFSF, travelled to Beijing in a bid to persuade the country's leaders to invest in the fund.

Though no deal was finalised, it was thought the Chinese authorities may agree to help the troubled economies, not least because the region is one the biggest market for Chinese exports and a crisis may dent demand for Chinese goods and hurt its export-dependent economy.

However, the decision by the Greece government to hold a referendum on the latest bailout package has seen the authorities take a cautious approach.

“Like our European friends, we did not expect [the call for a] Greek referendum,” said Mr Zhu.

“It was an independent decision taken by Greece. I hope this period of uncertainty would be contained,” he added.

The decision by the Greek government has also resulted in the Euro zone leaders withholding the next 8bn euros of rescue loans for Greece until after the referendum.