Premier Wen Jiabao said his country and will play its part to "prevent the further spread of the sovereign debt crisis," but warned that China will not sign a blank cheque for states that have failed to carry out full reform.
"Countries must first put their own houses in order," he told the World Economic Forum in Dalian.
Mr Wen said he had spoken to José Manuel Barroso, the president of the European Commission, laying the conditions for Chinese intervention.
"I made clear to him that we are confident Europe will overcome its difficulties and make a full recovery. We have on many occasions expressed our readiness to extend a helping hand, and that we are willing to invest more in European countries."
"At the same time, we need bold steps to give redirection to China's strategic objective. We believe they should recognise China’s full market economy status," he said, referring to World Trade Organisation rules.
"To show one’s sincerity on this issue ... is the way a friend treats another friend," he said.
Li Daokui, a member of the monetary policy committee of China's central bank, warned that nobody should delude themselves about China's willingness to play the role of white knight.
"I don't think any country can be saved by China in today's world. Countries can only save themselves by pushing through reforms," he told a panel at the forum, echoing langugage from German Chancellor Angela Merkel.
Professor Li said China must stop investing its hard-earned wealth in western debt and switch its incremental holdings into "physical assets", including the equities of major western companies.
"China is the most patient investor in the world. Imagine if our $3.2 trillion in foreign reserves had been controlled by George Soros: financial markets would be in much greater chaos," he said.
China has accumulated roughly 800bn euros of eurozone bonds over the last decade, mostly from the AAA core such as Germany, France, and the Netherlands. This has been a crucial factor explaining the strength of the euro.
It has intervened a number of times in peripheral markets since the crisis began, allegedly accumulating €50bn (£43.48bn)of Spanish debt.
However, the relentless climb in Spanish and Italian yields over the summer indicates clear limits to Chinese buying. China's central bank has already suffered a large paper loss on Portuguese debt bought with much fanfare before that country needed a rescue.
Italy's finance minister Giulio Tremonti said it is hard to persuade Asian investors to buy Italian debt when the European Central Bank hesitates to do so.
China's sovereign wealth fund -- China Investment Corporation -- has been in talks with Italy but is more interested in buying key industrial and strategic assets.
Lou Jiwei, CIC's chief, came under harsh attack in China for losses on US investments after the Lehman crisis. He is unlikely to risk his career a second time by taking a gamble on Italian or Spanish debt.
Market status under the WTO has become the Holy Grail for China, both because it makes the country less vulnerable to 'anti-dumping' sanctions from the EU and because it marks the country's final coming of age in the global economy.
Beijing is bitter that the EU recognises the market status of Russia despite open violations of WTO rules by the Kremlin, claiming that the "double standard" is a disguised form of protectionism.
Under its WTO accesssion accord in 2001, China remains a "non-market economy" for 15 years unless other members agree to fast-track the process. There could still be problems even after 2016 if major powers take a tough line.
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