Spain welcomes Chinese investment – even with strings attached

China's visiting vice premier said his country would buy $7.9 billion in Spanish bonds. El País newspaper dubbed Li Keqiang the new 'Mr. Marshall' – a reference to America's post-World War II Marshall Plan.

By , Correspondent

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    China's Vice-Premier Li Keqiang (l.) and Spanish Prime Minister José Luis Rodríguez Zapatero smile during the signing of commercial agreements between the two countries at Madrid's Moncloa Palace on Jan. 5.
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Chinese Vice Premier Li Keqiang, who is visiting Spain, told host Prime Minister José Luis Rodríguez Zapatero that his country was willing to buy 6 billion euros – $7.9 billion – in Spanish bonds, El País reported Thursday.

Citing government sources, the paper reported that Mr. Li said “China is willing to buy as much Spanish bonds as Greek and Portuguese combined, that is, around 6 billion euros.” The Chinese financial support is so welcome that El País referred to Mr. Li as a new "Mr. Marshall" – a reference to the Marshall Plan that boosted a Europe devastated by World War II.

Government and diplomatic offices could not be reached Thursday as it is a holiday in Spain.

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A statement on China's Commerce Ministry’s website quoted Vice Commerce Minister Gao Hucheng as saying that China has increased its holdings of Spanish and European debt, and that he was confident in the Spanish and European financial markets. China already owns around 10 percent of Spain’s foreign debt.

Market pressure on Spanish debt relaxed this week after Mr. Li said in an op-ed published Monday that China would continue buying it. But interest paid by Spain remains high, at around 5.4 percent, more than 2 percent higher than the benchmark German bond. Chinese political and financial support lends a significant psychological boost, analysts say, but it can’t solve the structural problems plaguing peripheral European economies like Spain's.

While deficit reduction targets released this week point to successful implementation of a 50 billion euro austerity program, the market remains jittery over the health of Spanish private and savings banks.

China’s goodwill also comes attached to European willingness to open up its markets to Chinese companies and to relaxing restrictions of technology transfers.

Li's next stops are unlikely to meet as warm a welcome when he and the delegation of more than 100 officials and businessmen travel Thursday to Germany and then to Britain.

Countries that are not so desperate for Chinese cash are more skeptical of China's influence, analysts say.

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