Greece's recently approved austerity plan might not resolve deeper questions over how the country will repay its debts beyond this summer, but it appears one of the world's biggest investors still has faith in the country and and the greater eurozone. After all, it would be too risky not to.

Earlier this week, just days before the Greek Parliament approved austerity measures amid talks of a possible default, China said it would keep investing in Europe's sovereign debt. Premier Wen Jiabao told reporters that the country actually increased the purchase of government bonds of some European countries and hadn't scaled back its euro holdings.

These acts "show our confidence in the economies of Europe and the eurozone," he said.

China's backing isn't all that surprising. It was only earlier this year when the Asian giant supported debt-ridden Spain by signing $7.3 billion in deals that included investments in everything from energy to banking to oil. And it was around this time last year that China pledged to make more than a dozen major commercial contracts for business in Greece.

The value of these purchases may very well be in flux amid debt problems that have put many investors on alert, but that's beside the point of China's voracious appetite. China has more to gain than lose by investing in Europe's future. Even as misery and uncertainty mounts in the region, the eurozone is still China's largest export market (accounting for roughly 20% of total shipments) and it's in its own interest to contain the crisis.

"They're not really concerned about short-term volatility," says Domenico Lombardi, senior fellow specializing in international monetary relations and global currencies at Brookings Institution.

Besides, as China expert Barry Naughton of the University of California in San Diego, pointed out earlier this year: The risks are relatively low since the European Union and the European Central Bank will likely swoop into the rescue if things get really bad.

Wednesday's $41 billion worth of budget cuts and asset purchases was part of a large-scale bailout launched last year to help debt-troubled Greece pay its loans. The European Union and the International Monetary Fund had required Greek lawmakers to pass the plan before releasing its next round of rescue payments.

China's foreign-exchange reserve, worth more than $3 trillion, is by far the biggest in the world and is viewed by politicians and corporate executives as a key source of capital. It's unclear just how much China has boosted its holdings of European bonds, as leaders keep the breakdown of its holdings secret. But just by saying it will invest in Europe, China indirectly calms markets and helps stabilize the euro, and in a way, sends a message to the world at large that it's a good global neighbor willing to help in times of crisis.

Longer-term, the Chinese have been looking to diversify its massive reserves away from the volatile U.S. dollar. To be sure, the euro has also seen its share of peaks and valleys throughout the crisis but the currency is still the most practical alternative to the greenback, says Lombardi, whose research has focused on the ongoing European crisis.

This surely isn't the last time we'll hear the Chinese back the eurozone. If and likely when financial instability rumbles in other parts of Europe in the coming months, we'll probably hear from the Chinese again.

European stock markets extended strong gains on Thursday following Greece's approval of austerity measures needed to unlock critical bailout funding and stave off a debt default.

London's benchmark FTSE 100 index of top shares jumped 1.53 per cent to 5,945.71 points, while in Frankfurt the DAX gained 1.13 per cent to 7,376.24 points and in Paris the CAC 40 climbed 1.48 per cent to 3,982.21 points.

"The recent rise in European markets has continued today as markets end the month, quarter and first half of 2011 on a positive note, with oil and banking sectors leading the gainers as fears about an imminent Greek default get pushed out beyond the release of the next tranche of bailout funds," said CMC Markets analyst Michael Hewson .

The Greek parliament approved Thursday measures to implement 28.4 billion euros ($41 billion) in unpopular budget cuts and tax hikes despite street protests that turned violent this week.

The EU quickly said in response that Greece had now met conditions for the release of the next installment of 12 billion euros of bailout funds under under its 110-billion-euro EU-IMF bailout package agreed last year.

Athens faced the prospect of default in July if the bailout funds had been held back.

The Greek vote will also allow talks to proceed on a second bailout package expected to total a similar amount to ensure Athens has sufficient funding for the next three years.

News that German banks will take part in a second Greek debt rescue package also helped improve market sentiment, as did moves by Portugal and Italy to further tighten their budgetary belts.

Brussels ended the day up 0.97 per cent, Amsterdam rose 1.3 per cent, Milan climbed 1.62 per cent, Madrid jumped 2.13 per cent and Lisbon soared 3.03 per cent.

London was also supported by news that Lloyds bank will axe 15,000 more jobs and that the London Stock Exchange is once more a likely takeover target.

Lloyds, which is 41-per cent state-owned after a massive bailout, said it will axe 15,000 jobs in a drastic cost-cutting plan that will halve its international base and save £1.5 billion (1.66 billion euros, $2.4 billion) per year by 2014.

In response, LBG rocketed to the top of the FTSE 100 index, gaining 9.73 per cent to 49 pence as investors welcomed news of the measures.

Off the FTSE 100, the London Stock Exchange saw its share price jump 10.98 per cent to 1,061 pence, one day after The LSE and Toronto's bourse scrapped plans to merge after failing to win support from two-thirds of their shareholders.

"Shares in the London Stock Exchange rallied .. as investors speculated that the firm may become bid prey to Nasdaq OMX, having seen its multi-billion bid for Canada's TMX fall by the wayside," said analyst Giles Watts at City Index.

Nasdaq failed to take over LSE in in 2006 and 2007.

"Investors are now speculating that the firm's failure to secure a deal with the Canadian Exchange operator at a time of huge competition and subsequent consolidation within the sector makes it vulnerable," Watts added.

Wall Street also rallied on the Greek vote, with the Dow Jones Industrial average gaining 1.18 per cent to stand at 12,406.05 points at 1600 GMT.

The broader S&P 500 rose 0.94 per cent to 1,319.74 points, while the tech-heavy Nasdaq Composite climbed 1.19 per cent to 2,773.21 points.

Asian stock markets closed higher on Thursday after Greek lawmakers gave preliminary approval on Wednesday to the key package of spending cuts and tax hikes aimed at helping Athens avoid a catastrophic default.

Hong Kong gained 1.53 per cent, Tokyo added 0.19 per cent, Shanghai was up 1.23 per cent and Sydney rose 1.73 per cent.