China to be 'big player' in saving Spanish banks

PUBLISHED : Saturday, 16 April, 2011, 12:00am
UPDATED : Saturday, 16 April, 2011, 12:00am


Spanish Prime Minister Jose Luis Rodriguez Zapatero has told the South China Morning Post that China will be a 'very important player' in the Euro15 billion (HK$168 billion) recapitalisation of Spanish banks, with more concrete details of Chinese participation expected in the next two or three months.

Zapatero met President Hu Jintao and Premier Wen Jiabao during his visit to China this week. Speaking in Sanya after his meeting with Hu, Zapatero confirmed Chinese participation in the restructuring of debt-riddled savings banks that hold about half the deposits in Spain's financial system.

'Wen said they would contribute to the restructuring of Spanish savings banks,' Zapatero said. 'But to give you a figure, in my view, is a little premature at this stage.'

It will be the first time that Chinese firms participate in a fund to restructure Spain's savings banks.

'Premier Wen told me that Spain is [China's] best friend in the European Union and I believe that Spain is an important country that can help improve relations between China and the EU,' Zapatero said.

The Spanish government said on Wednesday that the state-run China Investment Corporation (CIC), a sovereign wealth fund, was studying a plan to inject Euro9.3 billion into Spain's ailing savings-bank sector.

But Madrid later withdrew the comment, blaming a communication error.

A CIC spokesman said it would 'explore all kinds of investment opportunities including the restructuring of the Spanish deposit banks' but denied the company had mentioned any investment figures, the Associated Press reported.

In Zapatero's meeting with Wen on Tuesday, Wen vowed that China would keep buying Spanish government bonds. China holds 12 per cent of foreign holdings of Spanish debt and Zapatero said that it was a sign of confidence.

'China opted for Spanish debt and the market reacted and said, well, if China can trust Spain, we cannot distrust.'

Analysts said Beijing's promises were valuable commitments that would shore up market confidence in Spain because China was now the wealthiest nation in the world in terms of its foreign exchange reserves.

However, some European investors said confidence that Spain would not follow Greece, Ireland and Portugal in seeking a bailout was not enough to persuade them to follow China in buying Spanish bonds, Bloomberg reported.

Zapatero said Spain was keen on attracting Chinese tourists, seeing the world's most populous nation and fastest growing main economy as having great potential. He said 55 million overseas tourists visited Spain each year, but only 100,000 from China.

Zapatero also said Spain could help China develop the Latin American market because of Spain's historic bonds with the region.

Spanish companies that had invested extensively in Latin American were willing to help China expand investment and trade there, he said.

In an apparent effort to please Chinese soccer fans, the Spanish government is trying to send Real Madrid to China in November. Previous plans failed due to disagreements over the price tag, mainland media have reported.

'Soccer can unite China and Spain,' Zapatero said. He said he had assigned his tourism minister to help co-ordinate the event.

Shot in the arm

The price tag for recapitalising Spanish banks is expected, in euros, to be: Euro15b