* China Premier Wen vows to buy Spanish gov’t debt
* Also pledges Chinese investment in savings banks
* PM Zapatero visiting China, Singapore on debt roadshow
(Recasts with Chinese premier, changes dateline, updates prices)
By Fiona Ortiz and Langi Chiang
MADRID/BEIJING, April 12 (Reuters) - China said it will carry on buying Spanish sovereign bonds and help fund a savings bank restructuring, giving the euro zone state fresh ammunition to allay lingering market concerns it might need a bailout.
Spanish officials said last week that China had completed the purchase of some 6 billion euros of Spanish public debt reportedly pledged in January.
“China is willing to buy more Spanish government debt and participate in a fund to restructure Spain’s savings banks,” Premier Wen Jiabao said on Tuesday after a meeting with Spanish Prime Minister Jose Luis Rodriguez Zapatero, according to state television and official news agency Xinhua.
Spain’s borrowing costs have soared since early last year on investor concern that it might follow other euro zone periphery countries down the road to a bailout, and the government has struggled to find investors for the savings banks, which are riddled with bad debts.
But in recent weeks Spain has decoupled from Portugal, which has asked for European financial aid, and risk premiums on its debt have narrowed.
“China has shown itself to be a very good friend to Spain as we’ve confronted the difficulties of the financial crisis, which fortunately are being solved,” Zapatero told Spanish radio stations from Beijing.
A Spanish government source told Reuters that Wen did not mention specific investment amounts at the meeting with Zapatero.
But China already held 12 percent of Spanish sovereign debt that was in foreign hands, the source said.
After the Chinese endorsement, the spread of Spanish 10-year bonds compared with German benchmark debt ES10YT=TWEB DE10YT=TWEB narrowed to 171 basis points — its lowest level since early February — before moving to about 173.
Zapatero is on a three-day visit to China and Singapore where he also has meetings scheduled with Chinese Vice Premier Li Keqiang and President Hu Jintao.
He will meet with bankers and fund managers in Singapore on Wednesday to show them data on Spain’s economy and finances to argue the case for investing in Spain [ID:nLDE7371I5].
Spain’s weak savings banks, crippled by property loans that soured, are seeking investors as the government has forced them to recapitalise and tried to fight off the spectre of a big state bailout for the financial sector.
The banks have struggled to find buyers, with the exception of the oil-rich Gulf state of Qatar’s sovereign wealth fund, which has pledged to invest 300 million euros in the sector.
Zapatero has slashed spending and pledged to cut the public deficit to 6 percent of gross domestic product this year. He has also implemented economic reforms, but the country is struggling to revive its sluggish economy and unemployment is the highest in Europe at 20 percent.
Reporting by Fiona Ortiz; Editing by Ruth Pitchford, John Stonestreet