A day ahead of the three-day visit, Li vowed that Beijing would continue to buy Spanish government bonds despite market fears of an Irish-style debt bailout, in a vote of confidence for the country's embattled economy.

Li, whose visit is part of three-nation European tour that will also include Germany and Britain, held talks with Finance Minister Elena Salgado and Industry Minister Miguel Sebastian on Tuesday hours after arriving in Madrid.

"The main topics discussed at the meeting included the economic situation in Spain and the European Union, as well as that of China, and Spanish-Chinese bilateral relations and how to strengthen them," Spanish finance ministry said in a brief statement.

The Chinese official, who is widely tipped to become China's next premier, is to meet on Wednesday with Prime Minister Jose Luis Rodriguez Zapatero.

Spain's foreign ministry has said that during the visit, "which will focus strongly on economic issues," the two countries will sign "a significant number of business agreements ... in key sectors for Spain's economic interests in China, such as banking, energy, transport and telecommunications."

Chinese state media on Monday also quoted Beijing's ambassador to Madrid as saying China is willing to make "positive efforts" to help Spain with its economic recovery.

Li's meetings this week with Zapatero and Salgado will "play a key role" in financial stabilisation, Xinhua news agency quoted the ambassador, Zhu Bangzao, as saying.

China has pledged to help support struggling eurozone economies.

A Chinese foreign ministry spokeswoman last month said Europe would be a "major market" for investment of Beijing's massive foreign exchange reserves.

China has pledged to buy bonds from Greece and Portugal, but it has not yet made any concrete commitments on the size of its investment.

In an op-ed piece in Spain's leading daily El Pais on Monday, Li said China has "confidence in the Spanish financial market, which has been translated into the purchase of its public debt, something we will continue to do in the future.

"China supports the measures adopted by Spain for its economic and financial readjustment, with the firm conviction that it will achieve a general economic recovery."

Investors have been spooked by the public deficits racked up by the Spanish government and its heavy reliance on the bond markets for fresh funds, leading them to demand higher and higher returns.

This in turn makes the government's problems even worse, stoking fears that Madrid could, like Ireland and Greece last year, be forced to seek help from the European Union and International Monetary Fund.

Also Tuesday, the chairman of Spanish energy giant Repsol, Antonio Brufau, and his counterpart at Chinese oil group Sinopec, Su Shulin, agreed during talks in Madrid "to create working groups to look for new joint business opportunities in the world," Repsol said.

The two companies announced a deal in October in which Repsol will 40 percent of its Brazilian affiliate to Sinopec for 7.1 billion dollars (5.4 billion euros).

"Brufau and Su Shulin agreed that the Repsol-Sinopec alliance will go much further than in the alliance in Brazil," a Repsol statement said.

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