China seems to be playing the European game with sophistication.
On Monday, Beijing indicated that it would offer “quite full support” to Christine Lagarde in her quest to become the next managing director of the International Monetary Fund. The Chinese seem to have realized that the distribution of voting power at the multilateral lender would make an insurrectionary bid for power by the emerging markets a losing battle. Support to the European candidate opens up the opportunity for a quiet back-room deal to put a Chinese official in an important position.
Earlier, during a visit to Hungary last week, Chinese Premier Wen Jiabao offered support to Europe in its moment of economic stress, by saying China would buy bonds denominated in euros at a time when wary bond investors have pushed up interest rates on Greek, Spanish and Irish bonds. This seems as much about diplomacy as about economics.