China Promises to Buy 6 Billion Euros of Spanish Debt
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China Promises to Buy 6 Billion Euros of Spanish Debt
Vice Premier Li Keqiang backs Spain’s finances during his visit to La Moncloa and assures that his country will continue to bet on Spain “in the short and the long term”
First stage in the tour of the Chinese leader
Amanda Mars and Miguel González reporting from Madrid, January 6, 2011
El País: China se compromete a comprar 6.000 millones de deuda española
Meeting of the delegations headed by Chinese Vice Premier Li Keqiang and Minister of Industry Miguel Sebastián in a breakfast organized by ICEX (Spanish Institute of Foreign Commerce). Photo by Álvaro García
Li Keqiang, Vice Premier of China and firm candidate to become the leader of the world’s second largest economy in 2013, was received yesterday like a new “Mister Marshall” in Madrid, the first stage of a European tour that will also bring him to the United Kingdom and Germany. The King, who celebrated his 73rd birthday, the President, José Luis Rodríguez Zapatero, the Ministers of Industry and Foreign Affairs, Miguel Sebastián and Trinidad Jiménez, and the leaders of Spanish business fêted the Chinese leader and his delegation, which included the leaders of forty companies, as Vice President Elena Salgado did on Tuesday.
Li generously repaid the hospitality of his hosts, and in a moment in which the international markets are scrutinizing the Spanish economy, gave strong backing to the solidity of the country’s finances and its capacity for recovery. “I have come to give a message of confidence. China believes that the people of Spain will overcome this crisis,” said the Chinese Vice Premier over breakfast with a hundred businessmen (among others, the presidents of Repsol and Telefónica, Antonio Brufau and César Alierta). It was not mere rhetoric. During his visit to La Moncloa, Li classified the measures adopted by Zapatero as “tough but necessary and adequate” and made concrete his proposal to acquire more of the Spanish public debt – it is estimated that the People’s Bank of China already holds close to 20% of what is in foreign coffers – “in the short, medium, and long term,” as he put forward in an article published in El País last Monday.
China is disposed to buy as many Spanish bonds as it has Greek and Portuguese ones put together, that is to say some 6 billion euros, according to sources in the Spanish government. Journalists could not direct questions toward Li, but they could do so to the Vice Minister of Commerce, Gao Hucheng, who avoided giving further details. “The transaction depends on the date, the total volume of the emission, and its presentation in the primary and secondary markets [purchased directly from the Treasury or on the market, respectively].” Sources in La Moncloa underlined the importance of China publicly committing to Spanish debt, most of all because China (the world’s biggest banker, with more than 2 trillion dollars of currency reserves) is, as its Vice Premier highlighted yesterday, “a responsible long-term investor” that “will be with Spain through good times and bad.”
Besides the debt, Li’s visit was the occasion to sign 16 commercial agreements for a total of 7.5 billion dollars (5.6 billion euros), according to the Chinese official press agency. These accords are in sectors as diverse as clean energy (Li visited the renewable energy center of Red Eléctrica de España, which powers the country’s transmission system and electricity grid), air traffic control systems, and the exportation of olives, wine, and Iberian ham. Although these last seem incidental, the colossal Chinese market (about 1.3 billion people) is sufficient to consume the total annual production of Spain.
Without a doubt, to compensate for the enormous commercial imbalance between the two countries, there will be more tourism: the Ministry of Industry has proposed that the 90,000 Chinese tourists who visited Spain in 2009 increase to 300,000 in 2012 and one million in 2020. “Why not two million?” Li blurted out to a surprised Trinidad Jiménez. To achieve this, it will be necessary to speed up the processing of visas, increase direct flights, and adapt offerings. “It’s not easy to picture a Chinese tourist on a beach,” admitted one wholesale travel agent.
The other major strategic proposal is for cooperation in Latin America. Li’s visit served to mark the ratification of a contract in which the oil company Sinopec will acquire 40% of the Brazilian affiliate of Repsol – a supposed value of 5.4 billion euros – as well as a cooperation agreement between BBVA and the China Development Bank in Latin America. The Asian giant is already the biggest stockholder in Chile, Peru, and Argentina, but it suffers from lack of experience in the region, and collaboration with Spain could benefit both countries.
Li reiterated yesterday that Spain is “China’s best friend in the European Union,” a title which the Spanish government has earned by defending, without success until now, the lifting of the arms embargo with Beijing, and by putting aside prickly issues like respect for human rights. “That is not a subject for bilateral dialogue; it is between China and the EU,” diplomatic sources insist in the face of criticism of Amnesty International.
Spain was one of the last countries to ask for the release of Nobel Peace Prize Laureate and political dissident Liu Xiaobo, and it used shared EU membership as an excuse for sending an ambassador to the Nobel ceremony.