When the rising dragon sees fading stars: China's view of the European Union. CEPS Special Report No. 73, 29 November 2012

This CEPS Special Report gives an overview of China’s perceptions of the EU and the protection of Chinese investments in Europe since the outbreak of the European sovereign debt crisis, especially since the more concrete talks in late 2011 on possible financial support from China. Although the top leadership of the communist party of China (CPC) changed in its recent handover, the perceptions described in this paper are likely to remain the same, just as the main tenets of China’s foreign policy are unlikely to change in the near future. The report argues that while the EU’s image has suffered greatly from the sovereign debt crisis and the way it has been handled, there is room to improve China’s view of Europe and for the EU to maintain a relatively strong negotiation position towards China.

Monetary policy and banking supervision: coordination instead of separation. CEPS Policy Brief No. 286, 12 December 2012

Introduction. Following the June 2012 European Council decision to place the ‘Single Supervisory Mechanism’ (SSM) within the European Central Bank, the general presumption in the policy discussions has been that there should be ‘Chinese walls’ between the supervisory and monetary policy arms of the ECB. The current legislative proposal, in fact, is explicit on this account. On the contrary, however, this paper finds that there is no need to impose a strict separation between these two functions. The authors argue, in fact, that a strict separation of supervision and monetary policy is not even desirable during a financial crisis when the systemic stability of the financial system represents the biggest threat to a monetary policy that aims at price stability. In their view, the key problem hampering the ECB today is that it lacks detailed information on the state of health of the banking system, which is often highly confidential. Chinese walls would not solve this problem. Moreover, in light of the fact that the new, proposed Supervisory Board will be composed to a large extent of representatives of the same institutions that also dominate the Governing Council, the paper finds that it does not make sense to have Chinese walls between two boards with largely overlapping memberships. In addition, it recommends that some members of the Supervisory Boards should be “independents” in order to reduce the tendency of supervisors to unduly delay the recognition of losses.