China's Wen to meet EU amid debt crisis, trade row

(BEIJING) - Chinese Premier Wen Jiabao meets Europe's leaders Thursday as the world's second-biggest economy falters in the eurozone debt crisis downdraft and the two sides face a long list of trade disputes.

Wen is attending his last China-EU summit in Brussels, meeting European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso, as well as EU foreign policy head Catherine Ashton.

Beijing has repeatedly expressed concern about the EU slowdown and offered help in resolving the debt crisis but at the same time has been increasingly forced to take costly stimulus steps of its own to sustain growth.

Wen told visiting German Chancellor Angela Merkel last month that despite "serious concerns," Beijing was ready to continue investing in eurozone sovereign debt markets "on condition of fully evaluating the risks."

He also said China was ready to strengthen communication and discussion with the EU, the European Central Bank, the International Monetary Fund and key countries to support indebted eurozone nations.

Europeans have expressed hope that China could deploy some of its trove of about $3 trillion in foreign exchange reserves -- the largest in the world -- to invest in EU bailout funds.

Wen's visit comes, however, with the European debt situation showing some improvement after the ECB announced a bold plan to buy government bonds so as to cut borrowing costs for under-pressure eurozone economies.

That move is in turn linked to the bloc's new bailout fund, the European Stability Mechanism, which was finally cleared earlier this month by Germany's top constitutional court, allowing full implementation.

In Brussels, EU sources said the talks would consolidate ties ahead of major Chinese leadership changes, due later this year and early next, and "it is not a summit for big decisions."

The summit will reflect EU appreciation of Wen's role in building ties and "look forward to continuing (the relationship) with the new leadership," one of the sources said.

Given the adverse economic backdrop, it would be important that both sides give a strong signal of "mutual confidence" in the future, the source added.

While stressing the positives, the EU source also recognised a long list of disputes but argued that they were only to be expected give the importance of the relationship as a whole.

The 27-state EU bloc is China's single largest export market while China is the EU's second largest trading partner after the United States, with total trade worth nearly 430 billion euros in 2011.

In that context, a series of disputes -- including the recent EU anti-dumping probe into Chinese solar panels, the biggest of its kind -- should be kept in proportion, the EU source said.

"Frictions only touch a small part of that," the source said, adding that EU procedures were to protect EU industry and well understood by all concerned.

EU sources said the community was also worried by increasing territorial disputes -- in the South China Sea and between Japan and China over disputed islands -- and stressed the need for diplomatic solutions.

"We are all disturbed by the escalation," the EU source said, adding: "I doubt it is directly linked to the leadership" change. "Periods of transition can be bumpy," the source said.

Other contentious issues to be covered will likely include human rights in China, and Syria and Iran on which Beijing has opposed activist Western policies, the sources said.

Thomas Koenig, London-based China programme coordinator with the European Council on Foreign Relations, said he would be looking to see if the crisis had eased sufficiently for the EU to assume a more robust stance towards Beijing.

"With China, it's always important to emphasise reciprocal engagement," Koenig said, adding he was hoping for a "little more candid assessment of the situation" in the relationship.

EU - China Summit