Savvy observers have noticed that China is the new big investor in Europe. Chinese money is flowing into European sovereign debt and into European companies. This is part of a diversification strategy for the Chinese, who have been shifting some of their assets out of the US dollar and into assets. This trend will be uneven over the next year, but if Europe plays its cards right, it stands to benefit greatly.
The Chinese are not looking at Europe with rose-tinted glasses, but there are reasons to be optimistic about the future of the Chinese-European relationship from an economic standpoint. The return on investment in Europe depends on how quickly and how strongly Europe can manage economic revival. This means restructuring the European economy so that it is producing competitive products and services, getting unemployment back down, and with it, consumption back up. This is the job of the EU's Europe 2020 programme, which I will leave to another day. It also means sorting out the problems of the euro zone with higher degrees of stability than are presently found in America. Relative performance is the key. If Europe succeeds at getting its economic house in order more quickly and thoroughly than America does, it will be the first and biggest benefactor of the crisis' biggest winner. Both China, as the country that has gained most from the crisis, followed by Europe, will emerge much stronger.
Divide and Rule
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