Chinese Vice Premier Li Keqiang backed Europe in its sovereign debt battle on Wednesday, starting a three-nation tour by promising to buy more Spanish government bonds.
Li, widely tipped to be the next premier, delivered a significant vote of confidence given China's world record foreign reserves of 2.648 trillion dollars (2.0 trillion euros), much of it in euros.
On his visit to Spain, Germany and Britain he is supporting Europe's recovery efforts and seeking to soothe global market fears of a debt quagmire spreading from Greece and Ireland to Portugal and even Spain.
"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," Li said in an opinion piece published in the German daily Sueddeutsche Zeitung on Wednesday.
Li opened his tour on Tuesday by promising to buy more Spanish debt when he met Finance Minister Elena Salgado.
"We believe Spain, with its government and people working together, will surely overcome current economic and fiscal difficulties," Li was quoted as saying by China's official Xinhua news agency.
China had even increased its buying activity amid European debt concerns, Li reportedly said.
"We will buy more depending on market conditions," he promised.
Later, in a meeting on Wednesday with Prime Minister Jose Luis Rodriguez Zapatero, he "expressed China's confidence in the Spanish economy, as shown by the country's investment in Spanish public debt," said a communique from the Spanish premier's office.
Spain's central and regional governments and its banks need to raise about 290 billion euros in gross debt in 2011, including rolling over existing bonds that expire.
That opens the risk of "funding stress" as rising rates make it increasingly expensive for the state to raise money, Moody's Investors Service warned last month.
Any EU or international bailout for Spain would be far bigger than anything seen to date in Europe -- its economy is twice that of Greece, Ireland and Portugal combined.
China's help could be important.
While China's top leaders were not seeking to single-handedly resolve the debt crisis, the investment in Spanish debt made sense, said Ken Peng, a Beijing-based economist for Citigroup.
Spanish bonds were delivering high yields and "might not be a bad investment," he added.
Credit Suisse economist in Beijing, Tao Dong, said that stabilising the economy in the EU -- the top destination for China's exports -- was in Bejing's own economic interests.
In late afternoon trade, China's support for Spain seemed to have helped the bond market.
The rate demanded by investors in return for buying Spanish debt eased significantly with 10-year bond yields down to 5.278 percent from 5.317 percent at Tuesday's close.
The Spanish risk premium -- the extra rate paid when compared to safer-bet German bonds -- also declined to 2.36 percentage points from 2.43 points at Tuesday's close and 2.49 points at the close on Monday.
After their talks, the Chinese and Spanish leaders ratified a 7.1-billion-dollar (5.2-billion-euro) deal between Spanish energy giant Repsol and China's biggest oil group Sinopec, the Spanish industry ministry said.
Under the deal, already cleared December 28 last year by Repsol shareholders, the Spanish group sold 40 percent of its Brazilian affiliate to Sinopec.
Li and Zapatero also signed about 10 other private commercial contracts, including for the purchase of Spanish cured ham and olive oil, and a handful of state deals.
The senior Chinese policymaker told a breakfast meeting of business leaders in Madrid on Wednesday that the total value of the contracts signed was 7.5 billion dollars (5.7 billion euros).
The Spanish government has slashed spending and says it is on track to meet its promise to lower the public deficit from 11.1 percent of annual output in 2009 to the European Union limit of 3.0 percent by 2013.
The economy, the EU's fifth biggest, slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of the once-booming property market.
It emerged with tepid growth of just 0.1 percent in the first quarter of 2010 and 0.2 percent in the second but then stalled with zero growth in the third.