EU, China agree to address trade, debt crisis

08:22, December 22, 2010      

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Chinese and European Union (L) officials at the 3rd EU-China High-level Economic & Trade Dialogue at the Diaoyutai State Guesthouse in Beijing Dec 21, 2010. (Xinhua Photo)

China and the European Union agreed to set up a mechanism to accelerate European high-tech sales to Asia's largest economy, and Beijing made vocal consolidations to assist EU better weather the troublesome fiscal debt crisis there.

Chinese Commerce Minister Chen Deming told the Third China-EU High-Level Economic and Trade Dialogue in Beijing Tuesday that China is looking to EU policymakers for "real action" to keep the 27-nation bloc on course. "We are very concerned about whether the European debt crisis can be managed and effectively controlled," Chen told reporters.

China has emerged as a key player in the European debt crisis. The world's second largest economy has the world's largest foreign exchange reserves at US$2.648 trillion, a significant portion of which is invested in the euro.

In October, China's Premier Wen Jiabao pledged to support Greece, which nearly defaulted earlier this year when investors snubbed its government debt. And, during a visit to Lisbon last month, Chinese President Hu Jintao pledged to help Portugal combat its fiscal crisis. Premier Wen Jiabao stressed that China always supports a stable euro and won't reduce European bond holdings.

"We want to see if the EU is able to control sovereign debt risks and whether consensus can be translated into real action to enable Europe to emerge from the financial crisis soon and in a good shape," Minister Chen Deming said Tuesday.

Discussions on high-tech sales and the debt crisis took place at the economic and trade dialogue and signal the probable expansion of European exports to China despite recent trade disputes, Chinese analysts believe. The EU has set restrictions on high-tech exports to China, although it is the largest exporter of technology to China. The export controls have been a major reason for its trade deficit with China.

"China and the EU reached a consensus on enhancing high-tech trade cooperation and a meeting between the two sides on the specific issue will be held as soon as possible," said Vice-Premier Wang Qishan Tuesday.

The EU has been China's largest trade partner for six years and the fourth largest investor, while China is the EU's second-biggest export market. China's trade surplus for the eleven months of this year with the EU is US$131 billion.

The two sides, during the Beijing talks, also agreed to speed up a feasibility study for a China-EU bilateral investment treaty, and the EU agreed to enhance communication with China for early recognition of China's market economy status.

The United States also has high-tech export controls targeting China but no commitment was made by the US to re-examine them during the China-US Joint Commission on Commerce and Trade held last week in Washington DC.

According to Chinese Customs, bilateral trade between EU and China jumped 33 percent year-on-year to $433.88 billion from January to November. EU exports to China grew by 32.6 percent while its imports rose by 33 percent.

The sovereign-debt issue is still experiencing fluctuation, said Olli Rehn, EU commissioner for economic and monetary affairs, adding that the EU appreciates China's support.

Last week, EU leaders pledged to defend debt-plagued euro-zone nations with a permanent bailout mechanism from mid-2013 -- the successor to a temporary, International Monetary Fund-backed trillion-dollar facility.

Greece and Ireland have both been bailed out by the EU and the IMF. Portugal, Spain, Belgium and even Italy are considered at risk by experts going into 2011. Moody's warned Tuesday it could lower Lisbon's debt rating.

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