Europe may try to woo China away from the USA

Niall Ferguson, professor of history at Harvard, writes today in the Guardian that Europe may try to woo China away from the USA.

In recent years, China has been buying dollars and US bonds, but, the returns on these dollars are now miserably low.

According to Ferguson: "American consumption and foreign policy are effectively being paid for with low-interest loans from Asia, allowing the Bush administration to give American voters both butter (tax cuts) and guns (the occupation of Iraq)."

China may want to reduce its dependence on the US export market and its exposure to the dollar.

Ferguson writes: "Step forward Europe -already a bigger market than the US for Chinese goods and proud owner of the euro, a currency looking increasingly like an alternative reserve currency to the dollar."

President Chirac recently went on a little-reported trip to Beijing.