EU's rescue is in it own hands, says trade chief

Karel De Gucht, the EU trade commissioner, warns that China's purchase of European sovereign debt is not a solution to the euro-zone's economic crisis - with gallery.

ZTE: One of China's top telecoms manufacturers, it has become a key supplier to European telecommunications operators. The company also has a presence in the UAE with a deal to manufacturer Etisalat-branded telephones. Bloomberg News
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BEIJING // Karel De Gucht, the EU trade commissioner, yesterday warned that China's purchase of European sovereign debt should not be seen as a solution to the euro-zone's growing economic crisis.

Mr De Gucht's comments were made in Beijing after a four-hour meeting with Chen Deming, the Chinese commerce minister.

"The solution to the problem of this sovereign debt crisis lies in Europe. It does not lie in China," Mr De Gucht said. "If they invest in the sovereign debt, they are more than welcome, but we have to take the appropriate actions in Europe … If not, you will never solve the crisis, but [Chinese investment] certainly helps."

His comments follow a promise late last month by Wen Jiabao, the Chinese premier, that Beijing would make further purchases of Greek government bonds, which investors have cold-shouldered since late last year, and would "continue to support Europe and the euro". Mr Chen, meanwhile, gave further assurances yesterday that China would continue to invest in European sovereign debt.

The commissioner added "it was very important the Greek economy starts to grow again" and that if this does not happen, "it will be very difficult to solve anything".

China and the EU also discussed plans yesterday to develop a bilateral investment treaty. Mr De Gucht said the Chinese side indicated "they're ready to negotiate on market access. For us that's very important".

Other subjects dealt with included China's restrictions on the export of certain raw materials, in light of a recent World Trade Organization (WTO) ruling against China in a case brought by the EU, the US and Mexico. China indicated, Mr De Gucht said, that it would appeal against this decision.

Mr De Gucht also said China's recent repealing of some of its controversial "indigenous innovation" rules favouring Chinese-developed technology in the vast Chinese public procurement sector should be treated with caution, as there were still policies in place that could work against European companies.

He said the Chinese had indicated they would come up with further legislation to reduce the bias in favour of local technology. However, implementation was the most crucial issue, Mr De Gucht said.

"There's a willingness at the state level to do something about it, but we see at the level of the provinces very little has changed up to now," he said.

Before Mr De Gucht's visit, the EU highlighted concerns that European companies felt China's economic openness was improving little if at all and that some were struggling to gain access to the vast Chinese market. But local analysts said there was a clear long-term trend towards liberalisation.

"China has liberalised market segments a lot since the WTO entry [in 2001], but the [lifting] of the restrictions should be gradual because of concerns over domestic firms," said Ren Xianfang, an analyst at IHS Global Insight in Beijing.

Frank Song, a professor at the School of Economics and Finance at the University of Hong Kong, said China had "benefited a lot" from using its WTO entry as a framework for opening up, and "for sure" further removal of trade and other barriers was likely.

"If you look at China's home electronics industry, it opened up and foreign companies came in and Chinese companies picked up quickly. Now they're doing fine," Prof Song said. "It's similar in the auto industry - Chinese companies are also doing fine."