BEIJING - China, a major holder of European debt, on Monday welcomed a eurozone decision to lend Spain up to 100 billion euros (S$160 billion) to save its banks, saying it would help lift confidence.

"We welcome the measures taken by Spain and the European Union jointly, we believe this will help restore market confidence," foreign ministry spokesman Liu Weimin told reporters.

After an emergency video conference lasting more than two hours on Saturday, eurozone finance ministers issued a statement announcing the deal, saying they were "willing to respond favourably" to a Spanish plea for help.

Spain's Economy Minister Luis de Guindos insisted the handout was not a rescue but a loan that imposes conditions on the banks.

However, it marked a dramatic climbdown for Madrid, which recently denied it needed any outside aid.

China has looked on with concern as the debt crisis deepens in Europe, its largest export market.

Growth fell to 8.1 per cent in China in the first quarter of 2012 from 9.7 per cent a year earlier, due in part to Europe's debt woes that have curbed business activity.

On Monday, Liu said China would "continue to support and participate in the efforts of Europe to overcome its sovereign debt issue".

"Since the debt crisis, the European side has taken many measures, including enhancing fiscal discipline and restoring economic growth," he said.

"It is fair to say that relevant measures have been effective."