UPDATE 2-China renews pledge to buy Spanish bonds

* China Premier Wen vows to buy Spanish gov’t debt

* Also pledges Chinese investment in savings banks

* PM Zapatero visiting China, Singapore on debt roadshow

(Recasts with Chinese premier, changes dateline, updates
prices)

By Fiona Ortiz and Langi Chiang

MADRID/BEIJING, April 12 (Reuters) – China said it will
carry on buying Spanish sovereign bonds and help fund a savings
bank restructuring, giving the euro zone state fresh ammunition
to allay lingering market concerns it might need a bailout.

Spanish officials said last week that China had completed
the purchase of some 6 billion euros of Spanish public debt
reportedly pledged in January.

“China is willing to buy more Spanish government debt and
participate in a fund to restructure Spain’s savings banks,”
Premier Wen Jiabao said on Tuesday after a meeting with Spanish
Prime Minister Jose Luis Rodriguez Zapatero, according to state
television and official news agency Xinhua.

Spain’s borrowing costs have soared since early last year on
investor concern that it might follow other euro zone periphery
countries down the road to a bailout, and the government has
struggled to find investors for the savings banks, which are
riddled with bad debts.

But in recent weeks Spain has decoupled from Portugal, which
has asked for European financial aid, and risk premiums on its
debt have narrowed.

“China has shown itself to be a very good friend to Spain as
we’ve confronted the difficulties of the financial crisis, which
fortunately are being solved,” Zapatero told Spanish radio
stations from Beijing.

A Spanish government source told Reuters that Wen did not
mention specific investment amounts at the meeting with
Zapatero.

But China already held 12 percent of Spanish sovereign debt
that was in foreign hands, the source said.

MAKING THE CASE FOR INVESTING

After the Chinese endorsement, the spread of Spanish 10-year
bonds compared with German benchmark debt (ES10YT=TWEB: Quote, Profile, Research)
(DE10YT=TWEB: Quote, Profile, Research) narrowed to 171 basis points — its lowest level
since early February — before moving to about 173.

Zapatero is on a three-day visit to China and Singapore
where he also has meetings scheduled with Chinese Vice Premier
Li Keqiang and President Hu Jintao.

He will meet with bankers and fund managers in Singapore on
Wednesday to show them data on Spain’s economy and finances to
argue the case for investing in Spain [ID:nLDE7371I5].

Spain’s weak savings banks, crippled by property loans that
soured, are seeking investors as the government has forced them
to recapitalise and tried to fight off the spectre of a big
state bailout for the financial sector.

The banks have struggled to find buyers, with the exception
of the oil-rich Gulf state of Qatar’s sovereign wealth fund,
which has pledged to invest 300 million euros in the sector.

Zapatero has slashed spending and pledged to cut the public
deficit to 6 percent of gross domestic product this year. He has
also implemented economic reforms, but the country is struggling
to revive its sluggish economy and unemployment is the highest
in Europe at 20 percent.

(Reporting by Fiona Ortiz; Editing by Ruth Pitchford, John
Stonestreet)

UPDATE 2-China renews pledge to buy Spanish bonds