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UPDATE 1-Spanish PM thanks China for "valuable" investment pledges

Published 04/13/2011, 01:30 AM
Updated 04/13/2011, 01:32 AM

* China has vowed to keep buying Spanish government bonds

* China will also participate in restructuring Spanish banks

* Spain wants China to look at infrastructure investments (Adds quotes, details)

BEIJING, April 13 (Reuters) - China's promises to buy Spanish government bonds and invest in the restructuring of Spanish banks are valuable commitments that will shore up market confidence in the euro zone state, Spanish Prime Minister Jose Luis Rodriguez Zapatero said on Wednesday.

Since the deepening of European debt woes last year, China has repeatedly expressed optimism about the health of the Spanish economy and the wider euro zone, backing up its talk with large-scale purchases of European government bonds.

With Zapatero visiting Beijing, Chinese Premier Wen Jiabao took the pledges a step further, saying that China would continue to buy sovereign bonds and also participate in a fund to restructure Spain's debt-riddled savings banks.

"The two promises are very valuable. They will help promote our stability, reform and market confidence, especially the Spanish economic recovery, so I express my gratitude to the Chinese government," Zapatero told a news conference, according to the Chinese-language translation.

A Spanish government source told Reuters on Tuesday that Wen did not mention specific investment amounts at the meeting with Zapatero. China already held 12 percent of the Spanish sovereign debt in foreign hands, the source said. [ID:nLDE73B1NI]

While vowing to support Spain, Chinese officials have also made it clear that they remain concerned about fallout from Europe's debt crisis.

In comments published on Tuesday, Vice Finance Minister Li Yong warned that the troubles could spread beyond the euro zone's periphery if underlying structural problems were not properly addressed.

Asked whether Chinese officials had voiced such concerns in bilateral meetings, Zapatero said he had delivered a reassuring message.

"What we have said to Chinese officials and investors is that you should have confidence in Spain and such confidence is coming from the understanding of our economic fundamentals, fiscal capability, economic reform and our growth potential," he said.

"Analysts think that with Portugal asking for a bailout from the EU, euro zone sovereign debt risks are almost coming to an end, and this has been widely believed," he added.

Along with shoring up Chinese interest in Spanish bond issues, Zapatero's trip was also intended to help drum up business for Spanish firms.

Among the deals signed during the bilateral meetings were memorandums of understanding for Spanish wind turbine maker Gamesa to supply Chinese firms with 300 turbines for a total power capacity of 600 megawatts.

Zapatero said he was also encouraging the Chinese to invest in Spanish infrastructure, potentially including airports. Spain wants to sell up to 49 percent of the loss-making airport group AENA, worth a total of around 30 billion euros, as part of efforts to reduce a massive public deficit.

"We hope that we can attract private sector investment to develop and manage these airports," he said. (Reporting by Aileen Wang and Simon Rabinovitch; Editing by Ken Wills and Jonathan Hopfner)

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