China’s Hu begins Portugal visit, debt help eyed

By Andrei Khalip

LISBON, Nov 6 (BestGrowthStock) – Chinese President Hu Jintao began
a visit to Portugal on Saturday where it is hoped that China may
purchase some of the country’s sovereign debt and sign trade
deals to boost one of Europe’s most beleaguered economies.

Hu will meet President Anibal Cavaco Silva, whose status is
largely ceremonial, later on Saturday, and will see Prime
Minister Jose Socrates on Sunday to sign several treaties in the
areas of trade, renewable energy and tourism.

Portugal’s Treasury Secretary Carlos Pina told Reuters on
Thursday the country was making a major effort to diversify the
pool of investors in its sovereign debt with a particular focus
on China, which the government sees as a “strategic priority”.

There are hopes in Portugal for a repeat of Chinese promises
of debt purchases and investment to help the euro zone’s hardest
hit member, Greece. China last month offered to buy Greek bonds
when Greece returned to markets.

“China coming to buy Portuguese debt would give a sign to
other investors that it is safe to buy, that it will be paid
back. China doesn’t do bad business,” Basilio Horta, head of
Portugal’s investment and trade agency AICEP, told reporters.

Investor concerns that Portugal may fail to rein in its
budget deficit and debt have caused its debt premiums to spike
this year, raising the spectre of a Greek-style bailout.
The minority Socialist government maintains it will meet the
budget deficit target of 7.3 percent of GDP this year and 4.6
percent next year after it hammered out a treaty with the
opposition to push an austere 2011 budget through parliament.

Investors also fear that Portugal may slide into a new
recession next year as austerity measures, like higher taxes,
will kick in, but the government is betting on export growth to
keep the economy from contracting.

Possible deals to sell more Portuguese products like wine
and olive oil in the world’s most populous country would help
boost exports and avoid a recession.

Chinese state entities generally have been conservative
about investing in foreign financial markets and the Chinese
government faces domestic political criticism over losses
incurred by these entities during the global financial crisis.

Still, China may calculate its support of troubled European
countries would help deflect international criticism of its
trade policies and its refusal to let its yuan currency
appreciate sharply.
Hu comes to Lisbon after two days of talks with French
President Nicolas Sarkozy, where the two have reached “real
convergence” over the need to reform the global financial system
and France told China that balanced trade was the best way to
shield the world from future crises. [ID:nLDE6A420D]

(Editing by Michael Roddy)

China’s Hu begins Portugal visit, debt help eyed