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China offers help to debt-hit Lisbon

By Peter Wise in Lisbon
Published: November 7 2010 18:55 | Last updated: November 7 2010 18:55

China has promised “concrete measures” to help Portugal, which is struggling to avert a sovereign debt crisis, with support that is expected to include purchases of Portuguese government debt.

At the end of a two-day state visit by President Hu Jintao, Chinese and Portuguese officials also signed on Sunday a number of bilateral commercial deals, including joint ventures in the fast-growing Portuguese-speaking economies of Brazil and Angola.

“We are ready to take concrete measures to help Portugal overcome the global financial crisis,” Mr Hu said.

Fu Ying, China’s deputy foreign minister, said China was committed to investing in European bonds and was ready to help Portugal.

“We are definitely concerned if our friends are in difficulties,” she told journalists.

Portugal’s borrowing costs have come under increasing pressure as investors fear it might be forced to follow Greece in seeking financial support from the European Union and the International Monetary Fund.

The yield on Portugal’s benchmark 10-year government bonds reached a euro-era high of almost 6.8 per cent on Thursday amid financial market concern over EU proposals to make bondholders share more of the burden of any future bail-out.

José Vieira da Silva, Portugal’s economy minister, welcomed China’s interest in purchasing Portuguese sovereign debt, saying it would help diversify an investor base highly concentrated in Europe.

Basílio Horta, head of Portugal’s investment and trade agency, said China’s appetite for Portuguese government bonds would send a positive signal to other potential investors.

Chinese purchases of European government bonds are seen as a means of diversifying the country’s sovereign debt portfolio, which is heavily focused on the US, and of winning political support against US pressure for China to allow faster appreciation of its currency.

A senior Lisbon official said Asian investors, including Chinese institutions, purchased 5 per cent of a Portuguese debt issue in February and 19.5 per cent of another in March.

China has previously bought Spanish government bonds and has made a similar offer to buy Greek government debt when Athens resumes issuing.

Mr Hu said China and Portugal had agreed to work towards doubling their bilateral trade within five years and balancing commercial flows, which are currently highly favourable to China.

Among the deals made, Millennium BCP, Portugal’s biggest listed bank, signed an agreement to increase co-operation with Industrial and Commercial Bank of China.

BCP, which recently acquired an onshore licence to operate in Macao, a former Portuguese territory near Hong Kong, said the accord focused on developing business between China, Portugal, Angola and Mozambique, former Portuguese colonies.

Portugal Telecom signed an agreement with China’s Huawei Technologies for the joint development of fibre-optic and other telecoms services.

António Mexia, chief of Energias de Portugal, said China Power International had expressed interest in buying more than 2 per cent of the company.




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