Business Irish

Monday 28 May 2018

Ireland benefits as China backs our bailout package

Asian buyers account for 21.5pc of the €5bn in five-year bonds, says European Commission

Li Keqiang, China's vice-premier
Li Keqiang, China's vice-premier

Emmet Oliver and Donal O'Donovan

Ireland's bailout package from the EU is being funded in part by China, it has emerged, after Asian countries piled into EU debt issued to rescue the Irish economy.

Asian buyers accounted for 21.5pc of the €5bn of five-year bonds, compared with their 4pc average for EU bond sales since December 2008, the European Commission said.

Europe represented 71.5pc -- with the UK taking 16.5pc -- and the Americas 6pc, the EU said. China has to date been a relatively small buyer of Irish bonds, but has been stepping up its presence in the euro bond market, generally.

The country first emerged as a buyer of Irish debt in 2008, but the main buyers remain in the UK, Germany, France and the US.

The eurozone has looked to China over the past year for support in tackling the euro-area debt crisis triggered by Greece, which received a €110bn rescue in May. Ireland followed in late November with an €85bn package.

Chinese vice-commerce minister Gao Hucheng said yesterday in Madrid that China would buy Spanish public debt in the primary and secondary markets.

During a visit to Brussels in early October, Chinese Premier Wen Jiabao said China had acted as a "real friend" to the euro area through "a large quantity" of bond purchases in the past and a policy to "maintain the debt stability in the eurozone".

"Interest was very strong," the commission said. "This is a sign of confidence in the euro area."

China's reported willingness to spend €6bn buying EU government debt indicates the change in the world economic order, but market sources questioned whether it is enough to make a difference to Europe's debt crisis.

Spain's 'El Pais' newspaper reported that China is prepared to buy €6bn of Spanish government bonds, citing sources in the Spanish government. China has the cash to execute the deal but sources in the market were sceptical about how big an impact the move will have.



Refinance

"If China buys enough bonds then Spain will be able to refinance and will not need a bailout, but to ensure that result China would have to buy very big numbers of bonds," said Gary Jenkins of Evolution Securities.

Mr Jenkins said Spain needed to borrow more than €150bn in 2011 in very difficult markets, dwarfing the €6bn being discussed.

The 'El Pais' figure is unconfirmed but China's deputy premier Li Keqiang said his country would continue buying Spanish government debt before he arrived in Madrid on a visit earlier this week.

The Chinese deputy premier will also visit Germany and the UK.

Irish Independent

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