China Offers to Help Portugal but Silent on Debt

Sunday, 07 Nov 2010 04:25 PM

 

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China will back Portugal's efforts to deal with fallout from the world financial crisis, President Hu Jintao said on Sunday, but he stopped short of promising to buy Portuguese bonds as the debt-ridden country had hoped.

"We are willing to take concrete measures to help Portugal cope with the global financial crisis," he said after meeting Prime Minister Jose Socrates, without elaborating.

The meeting was the last stop of Hu's four-day to France and Portugal before returning to Beijing later on Sunday.

Last month, Premier Wen Jiabao promised to buy Greek government bonds when Athens returns to markets, in a show of support for the country whose debt burden pushed the euro zone into crisis and required an international bailout.

Portugal, which unlike Greece still sells bonds on financial markets although at high cost, had hoped for a similar promise as it is trying to soothe investors' concerns about its ability to cut a high budget deficit and rein in ballooning debt.

Deputy Foreign Minister Fu Ying, who is part of the Chinese delegation visiting Europe, told Reuters on Saturday that Beijing remained committed to investing in European bonds and was willing to lend Portugal a helping hand.

The Chinese government faces criticism at home over losses which state entities incurred during the global crisis. But Beijing may calculate that using part of its huge foreign currency reserves to support troubled European countries would help to deflect international criticism of its trade policies and its refusal to let its yuan currency appreciate sharply.

Portugal and China also signed several cooperation treaties in areas such as financial services, logistics, renewable energy and tourism, and agreed to work to double their bilateral trade by 2015.

Hu said he would encourage Chinese companies to invest in Portugal, while China also wanted Portuguese firms to sell more goods in the world's most populous country.

 

A stern-looking Socrates thanked Hu for a "personal effort" to achieve not only the doubling of trade and more mutual investment, but also "a more balanced relationship so that both our peoples can benefit from this ambition".

Portuguese imports from China in the January-August period jumped 47 percent to 1.03 billion euros ($1.45 billion) from last year, while exports to the world's second largest economy in the first eight months of the year totalled just 149 million euros.

Investors' concerns that Portugal may fail to rein in its budget deficit and debt have caused its debt premiums to soar this year, raising the risk of a Greek-style bailout.

But the minority Socialist government maintains it will meet the budget deficit target of 7.3 percent of GDP this year and 4.6 percent in 2011 year. It is betting on higher exports to avoid a new recession next year, when tough austerity measures such as higher taxes and wage cuts will start.

In an example of possible investment, Portugal's largest company and utility EDP said China Power Holding International (CPI), with which it signed an agreement for a potential partnership, expressed interest in buying a stake in the Portuguese company.

"Given the strategic significance the cooperation partnership may have, CPI has manifested its interest in a potential entry into EDP's capital," EDP said in a statement.

Other agreements included a joint effort to identify business opportunities by Industrial & Commercial Bank of China , the world's biggest lender by market value, and Portugal's largest listed bank Millennium bcp.

China's Huawei Technologies, the world's second-largest telecommunications equipment maker, and Portugal Telecom signed a deal to work together to develop new generation services.

© 2014 Thomson/Reuters. All rights reserved.

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