UPDATE 1-China’s Hu tells Portugal wants closer ties

* Portugal hopes for repeat of China debt promises to Greece

* Hu to meet PM Socrates on Sunday, to sign trade deals

* Visit starts as thousands march against austerity

(Adds comments by presidents, Chinese deputy minister)

By Shrikesh Laxmidas and Kevin Yao

LISBON, Nov 6 (BestGrowthStock) – Chinese President Hu Jintao said
he wanted closer ties to Portugal on Saturday during a visit
where it is hoped China may purchase sovereign debt and sign
trade deals to boost one of Europe’s most beleaguered economies.

Speaking to reporters after meeting President Anibal Cavaco
Silva, whose status is largely ceremonial, Hu did not address
the debt issue, but spoke of increasing ties.

“Facing a complex international scenario, the Chinese side
is ready to work with the Portuguese side so as to develop our
relationships and lift the global Sino-Portuguese strategy to an
even higher level,” Hu said.

He will see Prime Minister Jose Socrates on Sunday to sign
treaties in the areas of trade, renewable energy and tourism.

Cavaco Silva said he was “very satisfied to learn that China
sees with interest the possibilities of investing in Portugal”.

Chinese Deputy Foreign Minister Fu Ying, who is part of the
Chinese delegation, told Reuters earlier that China remains
committed to investing in European bonds and is willing to lend
a helping hand to debt-ridden Portugal.

“European bonds have always been an investment option and
our attitude has been coherent and pro-active… Portugal, along
with other southern European countries, has maintained very
friendly relations with China and we are definitely concerned if
our friends are in difficulties,” she said without elaborating.

Last month, Premier Wen Jiabao promised to buy Greek
government bonds, when Greece returned to markets, in a show of
support for the country whose debt burden pushed the euro zone
into crisis and required an international bailout.

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”.

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.

“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.
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.

Just before Hu spoke, thousands of civil servants marched in
the centre of the capital protesting against wage cuts, which
are part of next year’s budget. Labour unions organised the
protest in preparation for the Nov. 24 general strike.

Investors also fear that Portugal may slide into a new
recession next year as unpopular 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]

(Writing by Andrei Khalip; editing by Michael Roddy)

UPDATE 1-China’s Hu tells Portugal wants closer ties