Paper

China stands by the Euro, What’s really going on?

This paper will explore the article written by Xiao Gang, Chairman of the Board of Directors of Bank of China Ltd., published February 16th, 2011 by the International Business Times. The article is in support of the Euro and how its demise would destabilize globalization. We will explore that premise in the following text as well as why the chairman of Chinas Bank cares whether the Euro lives or dies. We will also pinpoint how this article ties into our textbook chapters.

The Euro is a relatively new phenomenon in the global economy. It was established as part of the European Union’s goal to have a single currency that would be immune to exchange rates fluctuations and reduce transaction costs associated with currency exchange. Most of these are discussed in detail in chapter 10, financial forces. With the current economic crisis affecting the global economy the European Union Is finding themselves staring down criticism of the Euro from countries that have weathered the economic storm better than some of their smaller members who are facing economic collapse.

Many EU countries like to flex their muscles and when a smaller country flounders and will immediately fall back into nationalistic views rather than what benefit s the whole. In the article it cites that survey’s in France and Germany are calling for a return to the Franc and Deutschmark and away from the Euro. This nationalistic mentality is not something that goes away quickly.

Because of this turmoil in the EU over the Euro the Chairman of the Board of Directors of Bank of China wrote and article in support of the Euro. Xiao Gang writes that the “saving the Euro is akin to saving globalization.” Xian cites several reasons for his interest in preserving the Euro, most notably it has

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historically resulted in price stability, kept inflation below 2%, reduced unemployment and ended several small wars among European countries. Combine this with...