China set to bailout Spain with a massive purchase of sovereign debt

China goes on its bailout tour and expresses confidence in Spain's ability to recover from its economic crisis.   Beijing will buy Spanish public debt despite market fears of an Irish-style bailout.  They may get their hands burned, but if not, they will profit handsomely by buying debt on fire sale as other investors panic. 

China has also bought some of Portugal's debt, but steered clear of Ireland and Greece. 

The comments by Vice Premier Li Keqiang were made in an op-ed piece in Spain's leading daily El Pais one day ahead of his arrival in Madrid for a three-day official visit, the start of a European tour that will also include Britain and Germany.  Via SMH

"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 Li, who is widely tipped to become China's next premier.

Investors have shown deep concern over the annual 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.

Spanish public debt rose to 57.7 percent of GDP at the end of September from 53.2 percent at the end of 2009.

El Pais article (in Spanish)


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