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What are the consequences of the eurozone sovereign debt crisis for Chinese investors? By Richard Li and Colin Galloway

As the prospect of a financial default in Greece inches steadily closer, Chinese investors in Europe are faced with a range of potentially profound consequences. On the one hand, companies already doing business with counterparties in eurozone countries face the prospect of being paid in a currency that may cease to exist. On the other, as European banks become increasingly reluctant to issue new loans or to roll over existing debt, domestic companies are undergoing a financial squeeze, creating opportunities for deep-pocketed Chinese investors to pick up European assets at bargain prices. Each case throws up a variety of often complex legal issues.

Breakup or secession

Although there are a multitude of potential breakup scenarios for the eurozone, investors need to plan for two basic outcomes. First, one or more individual countries might leave the union, either voluntarily or not. Second, the entire monetary framework might collapse, with the euro ceasing to exist, at least in its current form. This is an extreme scenario, but the extent of current sovereign indebtedness among southern European countries now makes it increasingly plausible. China Business Law Journal will be examining this issue in the second of this two-part series.

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