China signalled it would buy bonds when Greece issues debt again, in a show of support for a financially-stricken nation that hopes to become a gateway into Europe for Chinese products.
Kicking off a three-day visit to Greece, Chinese Premier Li Keqiang pledged to remain a long-term investor in Greek bonds and reiterated growth and CPI targets for the Chinese economy, though he warned the global economy remained uncertain.
“The Chinese economy is under pressure but it is still growing at a steady pace,” Li, speaking through an interpreter, told a news conference. “Certainly, the global economic recovery still has many uncertainties and faces many challenges.”
He said Chinese economic growth of 7.% this year was “logical” and reiterated a CPI growth target of 3.5%.
Athens to issue debt again this summer
Bailed out twice after nearly going bankrupt, Greece is hoping Chinese investment will help spur its battered economy to growth again. China, in turn, sees Greece’s strategic location as a portal into both Europe and Africa for the distribution of Chinese products.
“We have never abandoned the Greek bond market, but we are increasing our purchases,” Li said.
“I have expressed my will to [Greek Prime Minister Antonis] Samaras that when Greece will issue new Greek bonds, China will continue being a long-term and responsible investor.”
Li’s comments fell short of an explicit commitment to buy Greek bonds when Athens next issues debt. His predecessor, Wen Jiabao, made a similar promise on a trip to Athens in 2010 but there has been no confirmation China has acted on the pledge.
Buoyed by yields at a 4-1/2 year low and prospects of an economic recovery taking root, Athens returned to the bond markets in April after a four-year exile and is expected to issue debt again this summer.
China-Greece Investment deals
The two countries signed trade and investment deals worth over $5 billion (€3.6bn), including a $1.2 billion (€0.9bn) cooperation deal with renewable firm Terna Energy and a $1.5 billion (€1.1bn) deal with Greek container ship company Costamare.
Also during his trip to Greece, Li is scheduled to visit the port of Piraeus on Friday, where Chinese shipping group Cosco controls two container terminals and is bidding in the port’s privatisation, and then travel to Crete.
Chinese firms are among those vying to build an airport on the island, strategically located between Europe, Asia and Africa.
Li, who wrote in a letter to Greek daily Kathimerini that he was fascinated by Greek mythology as a boy, also promised China would encourage its companies to play an active part in Greece’s asset sale programme and infrastructure construction.
Li’s trip to Greece comes after a trip to Britain where he pledged China’s economy, the world’s second-largest behind the United States, would not suffer a hard landing and grow at a minimum clip of 7.5%.
The International Monetary Fund has recommended that China adopt an economic growth target of about 7% for 2015 and urged it to avoid further stimulus measures and concentrate on curtailing financial risks.
Li pledged China would stress reforms.
“When we talk about coordinating the rate of economic growth, this does not mean we will necessarily take measures, but we will take precautionary measures,” he said. “We attach great importance to structural reforms.”
Since the beginning of 2010, the EU and the IMF have agreed two successive aid programmes for Greece, totalling €240 billion (see full figures).
As a result, euro zone governments now hold more than 80% of Greece’s €319 billion public debt.
Signs of economic recovery are strengthening in Greece, which is expected to return to growth in 2014.
Athens returned to the bond markets in April after a four-year exile and is expected to issue debt again in the summer of 2014.
- Summer 2014: Greece expected to issue first public bonds after a four-year interruption caused by the sovereign debt crisis