EU, China leaders avoid protectionism after trade rows

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BRUSSELS (Reuters) – European Union and Chinese leaders agreed on Thursday to avoid trade protectionist measures following months of increasing tensions between the global partners with China undertaking to continue to invest in European debt.

At a summit in Brussels, the 15th between the world’s largest trading bloc and China, the second largest economy, Premier Wen Jiabao sought to play down a dispute with Europe over Beijing’s export policies and trade practices.

“We both (China and the European Union) follow free and open economic and trade policies, reject trade protectionism and work to advance economic globalization,” Wen told a business conference on the sidelines of the summit.

Wen and EU leaders Herman Van Rompuy and Jose Manuel Barroso emphasized the size and interdependence of their relationship which has seen trade double in size over the past eight years.

Commerce between them has been marked recently by disputes, including the European Commission’s accusation earlier this month that China had been selling solar panels below cost on the EU market.

The Chinese leader also said he believed Europe was able to overcome its debt crisis and that China would continue to play a role by investing in European debt.

“In recent months, China has been continuing to invest in the euro zone government bonds and bonds issued by the European Financial Stability Facility (EFSF),” he said, adding that China was also in talks on making other investments.

“Europe is one of the main markets for China to invest its foreign exchange reserves and China will continue to participate in efforts to tackle Europe’s debt crisis through appropriate channels.”

China’s foreign exchange reserves are the world’s largest at $3.24 trillion and economists say roughly a quarter of that consists of euro-denominated assets.

Wen also told the forum that China’s economy would stabilize as policy measures gain traction and that it was on track to meet its annual economic growth target.

Beijing has set a 7.5 percent target for economic growth in 2012 but some economists think that could be missed as a global slowdown drags down activity.


Wen’s delegation met Barroso, president of the executive European Commission, Van Rompuy, who heads the European Council representing national governments, and EU Trade Commissioner Karel De Gucht, among other EU officials.

Overseas trade is one of few bright spots in Europe and a critical source of growth for the region’s economy which has slumped under the weight of the debt and banking crises, with EU gross domestic product falling and unemployment steadily rising.

Trade between China and the European Union, with a market of 500 million people, rose to 428 billion euros in 2011 and Chinese companies are increasingly investing in Europe.

At the same time trade disputes are intensifying and Europeans are concerned about what they call “state capitalism”, where a government closely controls privately owned business as well as state-owned firms. It can use a range of policies – such as cheap finance and raw materials – to favor national companies.


The theme has run through a series of flare-ups this year, including China’s policy on exporting rare earth metals, trade in aluminum foil and the solar panels dispute.

De Gucht, the EU trade chief, said in May that the European Commission – the EU executive, which handles trade for the 27-member bloc – would consider new trade defenses for cases in which EU companies feared repercussions in China.

In March, the European Union joined the United States and Japan in challenging China at the WTO over its restrictions on rare earths which are used in advanced industries such as electronics and renewable energy.

The restrictions, say EU officials, give Chinese hi-tech companies access to cheaper raw materials.

The Commission is also investigating numerous accusations against China of dumping – where makers sell their products below cost in an effort to gain market share.

Until early September, the dumping accusations mainly concerned low-profile industries, such as aluminum foil, kitchenware and pipe fittings.

But two weeks ago the Commission launched a probe into suspected dumping of solar panels after a complaint by manufacturers in Germany, Italy and several other EU countries.

China exported more than $25 billion of solar panels to the European Union in 2011.

(Editing by Rosalind Russell and Rex Merrifield, Editing by Belinda Goldsmith)

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