China confident of Spain recovery

Posted on Jan 4, 2011 in AllEconomic News
China is confident that Spain will recover from its economic crisis, and Beijing will continue to buy Spanish public debt despite market fears of an Irish-style bailout, a top Chinese official said Monday.

Chinese Vice Premier Li Keqiang made these comments in an op-ed piece in Spain’s leading daily El Pais, a day ahead of his arrival in Madrid for a three-day official visit – the first leg of a European tour that will also include Britain and Germany.

“China supports Spain in the series of economic and financial adjustment measures it has adopted, and is convinced of the certainty of the full recovery of the Spanish economy,” Li said, according to an English transcript.

“China is a responsible long-term investor, both in the European and the Spanish financial markets. China has confidence in Spain’s financial market. It has purchased Spanish Treasury bonds and will buy still more,” Li added.

Spain has come under increasing pressure on concerns it may be forced to follow Greece and Ireland and seek an EU-IMF joint bailout, but while bond yields have risen, demand for Spanish debt remains solid, Reuters said.

Around 60 percent of demand for Spanish debt has come from non-resident investors, according to a Reuters source, and Asian interest has risen to a reported 9 percent at recent auctions.

An economic and financial rescue for Spain, the EU’s fifth-largest economy, would dwarf any precedent date in Europe. The size of its economy is twice that of Greece, Ireland and Portugal combined.

Spain’s central and regional governments and its banks need to raise about 290 billion euros ($385.3 billion) in gross debt on the markets in 2011, including rolling over existing debt, raising their exposure to “funding stress,” Moody’s Investors Service said last month, according to AFP.

Spain’s consumer prices climbed at an annual pace of 2.9 percent in December, the highest level in more than two years, propelled by higher fuel and tobacco costs, the National Statistics Institute data showed Monday.

China, the world’s biggest sovereign fund holder, has pledged its support to struggling eurozone economies.

Jiang Yu, a Chinese foreign ministry spokeswoman, said last month that Europe would be a “major market” for investment of Beijing’s massive foreign exchange reserves.

China confident of Spain recovery – People’s Daily Online.