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To back Europe, China vows to buy more bonds

01-04-2011 09:50 BJT Special Report:Vice Premier Li Keqiang Visits Europe |

China is to support Spain financially to help it overcome crippling debt woes, as Beijing has vowed to buy more Spanish public debt despite market fears of an Irish-style bailout.

Chinese Vice Premier Li Ke-qiang, authored an op-ed piece in Spain's leading daily El Pais Monday ahead of his arrival in Madrid for a three-day official visit. Li said in his article that Beijing has been buying Spanish government debts to back up Madrid.

"Since China is a responsible investor country in the long-term on the European financial markets, and in particular in Spain, we have confidence in the Spanish financial market, which has been translated into the acquisition of its public debt, something we will continue to do in the future," he said.

"China supports the measures adopted by Spain for its economic and financial readjustment, with the firm conviction that it will achieve a general economic recovery", said the Vice Premier.

Following Spain, Li is scheduled to visit Britain and Germany, the first major overseas entourage by a prominent Chinese leader.

Beijing has vowed since the eruption of the 2008 global financial crisis to act as a bulwark to back up euro-zone economies with its huge hard currency reserves. Chinese economists believe that the country ought to build up its solidarity with the European Union as it is China's largest trading partner. An expansion of euro-zone debt crisis from Greece and Ireland to other euro-using countries like Spain will not only harm Europe but also China.

Since Ireland was bailed out by EU and the International Monetary Fund with an aid package of nearly US$90 billion, investors have shown concern over the deficit being racked up by the Spanish government and its heavy reliance on the bond markets, leading them to demand higher and higher returns.

An economic and financial rescue for Spain would be far bigger than anything seen to date in Europe: the size of its economy is twice that of Greece, Ireland and Portugal combined, said The AFP in a report on Monday. Spanish public debt rose to 57.7 percent of GDP at the end of September from 53.2 percent at the end of 2009.

The Spanish economy, the EU's fifth largest, slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of its once-booming property market, The AFP report said.

It emerged with tepid growth of just 0.1 percent in the first quarter of 2010 and 0.2 percent in the second, but then stalled with zero percent growth in the third, according to the report.

Editor:Du Xiaodan |Source: People's Daily

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