China signs trade deal with Spain; reaffirms support of euro bonds

China has reaffirmed its commitment to buying Spanish government bonds, amidst growing concern about the health of peripheral euro zone debt.

On a visit to Spain, the Chinese Vice Premier Li Keqiang, also signed trade agreement between the two countries valued at $7.5-billion. China will purchase Spanish specialty products, including wine, olive oil and cured ham, among other goods.

China is a long-term and responsible investor in the Spanish and European financial markets, and it has confidence and great interest in the Spanish market, Mr. Li said.

Part of the deal was the ratification of an agreement by China Petroleum & Chemical Corp. (NYSE: SNP) to purchase certain Brazilian oil assts from Repsol YPF SA (NYSE: REP), the Spanish energy company.

We will buy more [Spanish government bonds] depending on market conditions, Li was quoted as saying by the Chinese news agency Xinhua.

Li also indicated that his country is open to Spanish financial firms setting up shop in Beijing.

Moreover, in an opinion piece in the German paper Sueddeutsche Zeitung, Li wrote that China's support of the EU's financial stabilisation measures and its help to certain countries in coping with the sovereign debt crisis are all conducive to promoting full economic recovery and steady growth.

Meanwhile, Spain is seeking to reduce its public deficit from 11.1 percent of GDP as of 20009 to the EU mandated limit of 3 percent by 2013.

However, the country’s governments and banks will have to raise almost 300-billion euros in gross debt in 2011, quite a tall task given the weakening confidence in the country’s bond markets.