There are views in some quarters that because the EU is China's biggest trading partner and China's largest export destination, China has to bail out the Eurozone, come what may, otherwise China herself will collapse as a result.

These views are over-hyped. Even if the Euro were to collapse, and I am not saying that it will,

(a) this would not mean the end of the EU as the stronger members will survive and do not necessarily have to be dragged down into the abyss. So while China's exports will be severely hit, as what happened at the height of the financial crisis, this would not mean China's export to the EU will totally collapse;

(b) the US market for Chinese cheap goods, though weak, is not to be written off as it is precisely during difficult times that more people will flock to cheaper goods;

(c) Inter-regional trade amongst China, Japan, Taiwan, and Korea has been growing rapidly to over 50% of their total trade. So the EU market though vitally important may not of itself spell Armageddon for China.

(d) Much of China's economy still depends on capital infrastructural investment driven by the Chinese state, backed by the world's largest foreign currency reserve of $3.2 trillion and counting. It was with financial muscles like this that the situation was stabilized quickly at the start of the financial crisis with a massive stimulus package. This palliative is still on the cards in extremis.

(e) As I was outlining elsewhere, China's domestic consumption is booming. With suitable supportive policies, this may provide a further cushion against any dramatic external shock.

(f) Regardless of recurring China Collapse predictions over the past few decades, it is important to understand that the Chinese Communist Party has come a long way since the days of Chairman Mao. See an analysis in a research note "Why the Chinese Communist Party may last longer than you think: A closer look into the China Threat and China Collapse theories" at http://www.andrewleunginternationalconsultants.com/files/…

That is why up to now, China does not appear to jump to join the European fire brigade or to suggest that she is willing to act at least as lender of last resort.

Neither is China incentivized to do so, as her plea to be treated as a Market Economy (Russia has long been so recognised) seems to have fallen on deaf years and much as she wants to import more from the West, the embargo is still not lifted on a lot of potential export to China of high-tech (and high-value) content.

Make no mistake. Europe remains China's largest trading partner and China will wish to see a stable and prosperous Europe as a vast market for her exports and source of strategic imports, let alone the huge contagious systemic risk should the Euro become unravelled. Additionally, China is very interested in acquiring European technologies, expertise, brands, asssets and markets. But that it not to say China will sell her family jewels or throw good money after bad for the rescue of the Eurozone.

Best regards,

Andrew