* Trade spats to feature in EU-China summit
* Chinese investment booms
* Euro crisis casts shadow over EU economy
By Sebastian Moffett and Kevin Yao
BRUSSELS, Sept 20 European Union and Chinese
leaders will try to bridge growing differences over trade and
find common ground on tackling Europe's debt crisis at a summit
in Brussels on Thursday.
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 EU, the world's biggest trading
bloc with a market of 500 million people, rose to 428 billion
euros in 2011, having doubled in size since 2003.
Chinese companies are increasingly investing in Europe,
while the Chinese government is an important buyer of the debt
of euro zone governments. 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.
At the same time, trade disputes are intensifying. In the
latest spat, the European Commission accused China of selling
solar panels below cost on the EU market, angering Beijing and
threatening wider business ties.
Beijing has not linked purchases of EU government bonds to
trade disputes, said Zhang Yongjun, an economist at the China
Centre for International Economic Exchanges, a Beijing
"But the two issues concern the bilateral relations and
cannot be separated."
An EU official played down the problems ahead of Thursday's
summit, which he said would not be a summit for big decisions
but rather a meeting focused on "consolidation".
Chinese Premier Wen Jiabao will meet European Commission
President Jose Manuel Barroso and Herman Van Rompuy, president
of the European Council, which represents national governments.
They will also discuss human rights and sustainable development.
Briefing journalists, the EU official, who spoke on
condition of anonymity, described the trade disputes as
"relatively routine" and said they were being worked at on a
technical level at the Commission and World Trade Organization.
"There is a huge amount of trade between the EU and China,
and yes there are some tensions," he said. "We have to keep
these things separate from the dialogue that we have. We need a
successful China ... China needs a successful EU."
The Financial Times, citing unnamed sources, reported on
Thursday that the EU had stalled a controversial trade case
against Chinese telecommunications companies ahead of the
Europeans are increasingly concerned over what they call
"state capitalism", where a government closely controls
privately owned business, as well as state-owned companies. It
can use a range of policies - such as cheap finance and raw
materials - to give an unfair competitive advantage to a
The theme has run through a series of flare-ups this year,
including China's policy on exporting rare earth metals, trade
in aluminium foil and the solar panels dispute.
EU trade commissioner Karel De Gucht said in May that the
European Commission - the EU executive, which handles trade for
the 27-member bloc - would consider new trade defences 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 aluminium 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.
"The global financial crisis and Europe's debt crisis have
already done a lot damage to the global economy," Chinese vice
foreign minister Song Tao told a news conference on Monday.
"Trade wars are not benefiting either side."
The euro zone crisis has hit EU demand this year, and the
United States has overtaken the EU to become China's biggest
export market. In August, Chinese exports to the United States
were up 3 percent from the same month in 2011, while exports to
the European Union fell 12.7 percent.
The leaders will likely confirm their willingness eventually
to sign an investment treaty - something Europeans would like in
order to be able to invest more freely in China and have better
protection for their intellectual property there.
China has encouraged its firms to invest more in European
firms, which help them get better foreign technology. The parent
of carmaker Geely bought Ford Motor Co's Volvo unit in
2010. This year, Sany Heavy Industry bought German
concrete pump maker Putzmeister.
Last month, China's Weichai Power , a
unit of Shandong Heavy Industry Group, said it would buy a 25
percent stake in German's Kion Group, the world's number two
fork lift truck maker.