IMF chief discusses China’s possible contribution to eurozone bailout fund

PanARMENIAN.Net - International Monetary Fund chief Christine Lagarde on Wednesday, November 9, warned the world was at risk of plunging into "uncertainty and financial instability" and urged Asian economies to be on their guard.

Speaking at the International Finance Forum in Beijing, Lagarde said Asia was not immune to problems currently sweeping the eurozone, as she began a two-day visit to China likely to focus on the deepening debt crisis in Europe.

"If we do not act together, the economy around the world runs the risk of a downward spiral of uncertainty, financial instability," she said.

It is unclear who Lagarde will meet in the Chinese capital, but talks are expected to touch on China's possible contribution to a bailout fund - the European Financial Stability Facility - to help the debt-laden eurozone.

European leaders have called on China, which has the world's largest foreign exchange reserves at $3.2 trillion, to invest in the fund.

Europe has been discussing with China and other investors how to structure a special purpose investment vehicle and is exploring the possibility of linking it to the IMF.

"We are all in it together and our fortune will rise or fall together," said Lagarde, fresh from a visit to Russia where she warned Moscow against complacency given the budget crises in eurozone states. "Asia is not immune. Whether it is the trade channel or whether it is the financial sector which can operate as a crisis accelerator, Asia needs to be prepared."

Lagarde also called for a stronger Chinese currency "in real effective terms", adding to intense international pressure for a faster appreciation in the yuan.

Lagarde is due to brief the press about her visit on Thursday.