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China's financial clout felt in Europe
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Portugal has repeatedly denied it needs aid. But so did Ireland and Greece right before both nations did an about-face and humbly requested assistance from the E.U. and the International Monetary Fund. Like Greece, the government in Portugal has dramatically overspent and is heavily in debt - albeit not as deeply. Investors also have little faith in Lisbon to rein in its expenses and avoid defaulting on its bonds without the aid of its larger neighbors.
Confidence in Portugal is so low that investors are demanding interest rates of about 7 percent to buy its bonds, a figure that most analysts agree is unsustainably high.
"European nations seem to want Portugal to accept a bailout soon to calm markets and avoid more contagion in the bigger economies" such as Spain and Italy, said Giada Giani, European economist for Citibank in London. "We do think Portugal will need a bailout."
China, however, may prove more helpful to Spain. Spanish newspaper El Pais reported last week that China was preparing to buy about $8 billion in Spanish government bonds as part of an effort to help address Europe's debt crisis. Spain's next big sale of debt is set for Thursday. Still, analysts said China would probably need to put up substantially more to have a serious impact on market sentiment.
Although Li did not publicly confirm the report, published during his visit to Madrid, he said China would continue to "play an active role" in finance markets, and that China would continue to support the euro.
On Monday, it was Britain's turn to win China's attention. In addition to deals with Jaguar Land Rover and BP, Li agreed to loan the Edinburgh Zoo two pandas, Tian Tian and Yuangguang, for 10 years.
"Together, today's deals will safeguard 700 jobs in the United Kingdom and are estimated to have the potential to create many more," Nick Clegg, Britain's deputy prime minister, said in an address welcoming Li. "The agreements we have seen today . . . [demonstrate] the momentum we are building together towards even stronger relations."