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China says mulling Spanish investment, including banks

Source: Reuters - Thu 21st Apr 2011

China is in talks to invest in Spain, including in the reorganisation of troubled Spanish savings banks, China's Ministry of Foreign Affairs said on Thursday.

The remarks confirm earlier comments from Spain that Madrid and Beijing were discussing possible investments, although the two have never shed light on the size of any deals.

"At present, related bodies are in communication with Spain to discuss all kinds of investment opportunities, including in the reorganisation of Spanish savings banks," ministry spokesman Hong Lei told a regular news briefing.

Worried that it too may be engulfed by Europe's debt crisis, Spain wants to attract new capital into its banks to assure investors its financial system does not need be bailed out, unlike Greece, Ireland and Portugal.

Spanish regional banks, or cajas, are Madrid's biggest headache right now after a bursting of the country's property bubble saddled banks with billions of euros in bad debt.

Madrid has estimated that the banks need at least 15 billion euros in new capital.

To that end, Spanish Prime Minister Jose Luis Rodriguez Zapatero visited China and Singapore last week to persuade them that Spain's public debt and banks were a good investment.

Some confusion accompanied the trip however, after China's sovereign wealth fund denied a comment from a Spanish government source that it may invest $9 billion in Spain.

Beijing is a natural target in Madrid's hunt for capital since China has $3.05 trillion worth of foreign exchange reserves and is looking for places to invest that mountain of cash.

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