Chinese Vice Premier Li Keqiang has backed Europe in its sovereign debt battle, starting a three-nation tour by promising to buy Spanish bonds and by signing multi-billion-euro contracts.
Li, widely tipped to be the next premier, delivered a significant vote of confidence given China's world record foreign reserves of $2.648 trillion, much of it in euros.
On his visit to Spain, Germany and Britain he is supporting Europe's recovery efforts and seeking to soothe global market fears of a debt quagmire spreading from Greece and Ireland to Portugal and even Spain.
'China's support of the EU's financial stabilisation measures and its help to certain countries in coping with the sovereign debt crisis are all conducive to promoting full economic recovery and steady growth,' Li said in an opinion piece published in the German daily Sueddeutsche Zeitung today.
He opened his tour yesterday by promising to buy more Spanish debt when he met with Finance Minister Elena Salgado. 'We believe Spain, with its government and people working together, will surely overcome current economic and fiscal difficulties,' Li was quoted as saying.
China had even increased its buying activity amid European debt concerns, Li reportedly said.
In a meeting with Prime Minister Jose Luis Rodriguez Zapatero, he 'expressed China's confidence in the Spanish economy, as shown by the country's investment in Spanish public debt,' a communique from the Spanish premier's office said.
Spain's central and regional governments and its banks need to raise about €290 billion in gross debt in 2011, including rolling over existing bonds that expire. That opens the risk of 'funding stress' as rising rates make it increasingly expensive for the state to raise money, Moody's Investors Service warned last month.
Any EU or international bailout for Spain would be far bigger than anything seen to date in Europe - its economy is twice that of Greece, Ireland and Portugal combined.
The Spanish government has slashed spending and says it is on track to meet its promise to lower the public deficit from 11.1% of annual output in 2009 to the European Union limit of 3% by 2013.
The economy, the EU's fifth biggest, slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of the once-booming property market. It emerged with tepid growth of just 0.1% in the first quarter of 2010 and 0.2% in the second but then stalled with zero growth in the third.
