China is on the brink of investing $13 billion in Spain and its ailing banking sector, according to Reuters.
The investment would be made by two different parties, one the Chinese sovereign wealth fund, for $9 billion, and the other, from private Chinese investors, worth $4 billion. This capital would help to alleviate the current funding needs of the country’s banks, which the government says need €15 billion ($21.7 billion).
A Reuters source claims the money may either be directly invested or used to create a fund.
This would go some way toward alleviating pressure on the Spanish sovereign. If China shows continued willingness to backstop the Spanish banking sector, it will alleviate the Spanish government’s need to jump in and provide funds on its own. If the Spanish government does need to jump in, it would then take further risk itself, endangering its stability, and may potentially force it into a bailout scenario with the European Union and IMF.
Whether or not this is just a one-off from China is unknown, but it certainly shows their leadership’s intention to prevent the European situation from spiraling further into disarray.