27th Sep 2023

China hints at Portuguese debt purchases

  • Chinese President Hu Jintao will visit France and Portugal between 4-7 November (Photo: Eduardo Zárate)

China has indicated its willingness to buy Portuguese government bonds, an important fillip to the beleaguered centre-left administration in Lisbon, currently struggling to avoid asking for a bail-out.

The announcement was made on Thursday (28 October) by Chinese vice-foreign minister Fu Ying, ahead of a visit to Portugal by Chinese President Hu Jintao next month.

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China "has always given positive and favorable consideration" to bond purchases when making state visits, Ms Fu told reporters in Beijing. She added that recent measures taken by the Portuguese government are "conducive" to economic recovery and growth.

The news was welcomed in Lisbon after budget talks between the minority government and the main opposition party ended in failure on Wednesday.

"China's interest is the result of a successful strategy of diversifying our investor base," Carlos Costa Pina, Portugal's finance secretary, told the Financial Times.

Investors had earlier reacted nervously to the breakdown in Portuguese budget talks, sending the yield on 10-year government bonds upwards by 21.6 basis points on Thursday to just over six percent.

Chinese premier Wen Jiabao made similar overtures to debt-sticken Greece earlier this month, prior to a visiting Athens, an indication of Beijing's growing willingness to use its huge currency reserves to strengthen diplomatic relations across the globe.

China has also previously bought Spanish government bonds, another of the eurozone's more vulnerable economies.

Separately, Beijing appeared to abruptly end its unannounced export embargo on crucial rare earth minerals to the United States, Europe and Japan, officials indicated.

Chinese customs agents on Thursday morning allowed shipments of the valuable minerals - used in a wide array of electronic devices - to resume to all three destinations, sources told the New York Times.

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