Chinese banks and companies in the northern port city of Tianjin have cut their exposure to Europe as the euro zone debt crisis festers, the official Financial News reported on Tuesday.
In a recent survey of 53 banks and 15 firms done by the local foreign exchange regulator, 11 banks said they had cut or stopped trade finance for European countries with high debt risk, suspended derivatives business with European banks, cut or stopped lending to foreign peers, particularly those from Europe, the newspaper said.
They also reduced the issuance of euro-denominated wealth management products as a weakening euro resulted in negative earnings last year.
The pullback by Chinese companies comes as European leaders have appealed to the Chinese government to support debt bailout funds. Although Chinese leaders have expressed confidence in European nations, they have also refrained from making firm financial commitments, urging Europe first to take further steps on its own.
Europe is Tianjin's second-largest exporting destination only after the United States. But local exporters are trying to sell more domestically or venture into emerging markets to cut their reliance on the euro zone, the newspaper said.
On the other hand, Chinese companies are quickening the pace of expansion abroad, taking advantage of a strengthening yuan and the sluggish economic outlook in Europe and the United States, the survey showed.
Meanwhile, since September, Chinese companies have typically paid their import bills quickly by buying foreign currencies, as tightening liquidity overseas has almost doubled their funding costs, according to the survey.
On the whole, Chinese banks have limited exposure to the euro zone debt crisis, it added.
The euro zone must agree and approve a 130-billion-euro ($170 billion) bailout package with Greece before Feb. 15 to allow time for complex legal procedures involved in the bond swap to be completed in time for a March 20 bond redemption.
Failure to strike a deal risks pushing Athens into a chaotic debt default that could threaten its future in the euro zone and worsen the crisis.
