Europe and the euro still top preference for China reserves (Bloomberg) (07-01-2011)

Statements of support for Europe and the euro come from China as stated by the Central Bank’s Deputy Governor, found on the central bank’s website for investment of the country’s world-record $2.65 trillion of foreign-exchange reserves.

China’s statements of support have included Vice Premier Li Keqiang this week expressing confidence in Spain’s financial markets and pledging more purchases of that nation’s debt. In backing European economies, China may help to prop up demand in the region that is its biggest market for exports and also the value of its euro-denominated assets.

Li’s opinion pieces in European newspapers this week also expressed China’s support.

“China supports the EU as it helps countries overcome their debt crises and contributes to broad economic recovery and stable growth by means of financial stability measures,” he wrote in German newspaper Sueddeutsche Zeitung.

Borrowing costs for Portugal surged at a six-month bill sale this week, the first of Europe’s high-deficit nations to test investor demand in 2011 after the threat of default forced Greece and Ireland to seek bailouts last year. Spain and Italy together need to raise 317 billion euros this year, according to BNP Paribas SA.

Source: Bloomberg