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(For full coverage of the flu outbreak, click [nFLU])
*Quarantine of Mexicans in China sours relations
*Spat revives old tensions between the countries
By Mica Rosenberg
MEXICO CITY, May 5 (Reuters) - China's decision to quarantine dozens of Mexicans to guard against the spread of a deadly new flu has soured the relationship between the two exporters, which compete for access to the U.S. market.
Still, a desire on both sides to boost bilateral trade and ship more Mexican raw materials to fast-growing China means the diplomatic flap should only be a temporary setback.
Mexico accused China of discrimination after Beijing, worried about the H1N1 flu strain, ordered some 70 Mexicans, including a honeymooning couple, into seclusion, even though none had symptoms.
Foreign Minister Patricia Espinosa called the isolation measures "unacceptable" and "without foundation" and advised Mexicans against traveling to China.
China rejected the criticism, saying the steps it had taken were purely medical and not discriminatory.
"This should not affect the relationship in the medium-term because we are talking about an overreaction on both sides," said Enrique Dussel, an expert on Mexican-Chinese trade at the UNAM University in Mexico City.
Across China, a Mexican man in Hong Kong was the only person found to be infected with the new flu strain that has killed 26 people in Mexico, two in the United States and made more than 1,500 people ill in 22 countries.
China sent a plane from Shanghai on Tuesday to pick up about 100 of its citizens from Mexico, mainly tourists, students and business people. Some Chinese had been holed up in hotels in northern Mexico for days waiting to leave.
The spat has revived old tensions between the two nations, which established diplomatic relations in 1972. There has been intense trade rivalry in recent years with Mexico blaming China for muscling in on its top export territory by flooding the United States with cheap goods made in low-wage factories.
President Felipe Calderon visited Beijing last July in a push to improve bilateral trade and Chinese President Hu Jintao came to Mexico in 2005 promising more investment in areas like auto parts manufacturing and mineral exploration.
Yet China has leaned more on South American commodities producers like Brazil and Chile for the materials it needs to fuel its export-oriented economy.
Mexico exported just $2 billion worth of goods to China last year, Dussel said, but imported $34 billion of Chinese products, from clothing and electronics to tourist trinkets.
"Of all the major countries in Latin America, China has the most tense relationship with Mexico," said Dan Erikson, an analyst at the Washington-based Inter-American Dialogue.
"The swine flu crisis has just revealed once again that they haven't built the partnership that both countries say that they want," Erikson said.
Other flu-affected nations have had citizens ensnared in China's quarantine measures, including at least four from the United States and more than 20 from Canada, but Mexico, the epicenter of the outbreak, said it has been unfairly targeted.
The person-to-person spread of the virus has kept alive fears of a pandemic, though scientists say this strain does not appear more deadly than common seasonal flu, which can kill 250,000 to 500,000 people a year globally.
Governments around the world are reacting to the outbreak with different levels of severity. Many suspended flights or warned their citizens against travel to Mexico.
Even as Mexico said the flu crisis seemed to be dissipating and prepared to reopen closed businesses, Chinese nationals wearing face masks and loaded with luggage streamed aboard a Chinese-chartered jet that stopped in Mexico City and the northern city of Tijuana.
"There is a lot of mutual ignorance and no strategic framework. This just shows there is a lot of work to be done" to improve ties, Dussel said. (Editing by Catherine Bremer)