China studies $13 bln investment in Spain banks

Concerns about delays in recapitalising Spain's ailing savings banks — heavily exposed to bad loans from a burst property bubble — have overshadowed the euro zone state's efforts to convince markets it is in no danger of needing a bailout.

According to official estimates, the banks need about 15 billion euros in fresh funding to meet strict new financial targets. But private estimates go as high as 100 billion euros when taking into account future losses related to real estate writedowns.

Spanish Prime Minister Jose Luis Rodriguez Zapatero is visiting China and Singapore this week, meeting with officials and fund managers to persuade them that Spain's sovereign bonds and its financial system are a good investment.

Speaking by telephone from Beijing, the Spanish government source told Reuters that Chinese sovereign wealth fund China Investment Corporation was studying an investment of $9 billion, and that private entities might add an additional $4 billion.

Madrid has forced the savings banks to consolidate and recapitalise. But they have had trouble finding private investors due to doubts about the scale of their overall losses.

Spain's borrowing costs have soared in the past year and a half due to concerns about its large deficit, but some confidence has returned to markets as Zapatero has cut the deficit and implemented economic reforms.

Zapatero met on Wednesday morning in Beijing with representatives from China Investment Corporation; top Chinese financial conglomerate CITIC Group; China's banking regulatory commission and other entities.