China links EU trade probe with eurozone debt help

(BEIJING) - China said Thursday a European investigation into imports of Chinese-made specialised steel products would "undermine" efforts to combat the eurozone crisis.

The European Commission has launched an anti-subsidy and anti-dumping investigation into coated sheet steel products, widely used in the building industry, after complaints Chinese imports were hurting European manufacturers.

At the same time, European leaders have sought contributions from Beijing to the eurozone's bailout fund.

China's commerce ministry expressed its "strong dissatisfaction" at the steel investigation and said it would send the "wrong signal to the world of trade protectionism", according to a statement on its website.

The probe "not only casts a shadow over China-EU steel trade, but it would also undermine the joint efforts of China and Europe to deal with the crisis", the statement said.

China and Europe have locked horns over a range of trade issues in recent years, including metal fasteners, potato starch and modems, but this appears to be the first time they have linked a trade spat to its debt crisis assistance.

European leaders last year approached China, which holds the world's largest foreign exchange reserves, to invest in a bail-out fund to rescue debt-stricken states.

Chinese leaders said last week they were considering using Europe's bail-out funds to help address the continent's fiscal woes, but stopped short of saying how the Asian power might be prepared to contribute.

Chinese companies, meanwhile, have been ramping up investment in Europe, buying utilities, energy firms and even luxury yacht makers, raising concerns that Beijing could gain too much influence over debt-laden economies.

Premier Wen Jiabao responded to these worries earlier this month saying China had neither the ability nor the intention to "buy Europe".

But the remarks by the commerce ministry suggest Beijing may try to leverage its help in the debt crisis to silence critics of its trade policies.

Europe, along with the United States, has repeatedly criticised China over a range of issues including the value of its currency and restrictions on exports of rare earths, vital in the manufacturing of many high-tech products.

At a summit in Beijing last week, China and Europe agreed to give fresh impetus to Beijing's efforts to attain full market economy status for China, a technical designation that would remove certain restrictions to Chinese exports and investments in Europe.

But EU leaders say the Asian giant has not yet met the necessary conditions, pointing out that most of China's largest companies are state-owned and their leaders appointed by the government.

The European Commission said the two investigations would take up to 15 months to complete, according to a statement on its website.