China worried Europe debt crisis will hit trade

BEIJING—China’s Commerce Ministry said Tuesday it is worried that Europe’s debt crisis could spark trade friction and hurt sales to the country’s largest export market.

The comments from ministry spokesman Shen Danyang come as debt-laden European countries fight Beijing over trade barriers, and as the US prepares a retaliatory trade measure against China.

A statement released by the office of US Trade Representative Ron Kirk said he will announce a major trade enforcement action against the world’s No. 2 economy at a press conference later Tuesday.

The European Union and US have long complained about China’s restrictions on foreign companies that include obstructing access to its markets in violation of free-trade pledges and pushing foreign companies out of promising fields such as clean energy.

US Ambassador to China Gary Locke said in a speech Tuesday in Beijing that such practices will hinder China’s development and innovation.

“China’s current business climate is causing growing frustrations among foreign business and government leaders, including my colleagues in Washington,” said Locke.

He said China’s lack of openness in finance, energy, health care and other areas of its economy and society will lead to less innovation from Chinese businesses, fewer opportunities for the Chinese people and slower growth for the economy.

Locke also repeated complaints that China’s undervalued currency was unfairly benefiting its exports and that rampant intellectual property theft in the country is costing foreign companies billions of dollars every year.

Locke’s comments come at an especially sensitive time as foreign governments look to China’s relatively robust economy to help drive global growth amid fears of a worldwide recession.

Shen, the commerce spokesman, told a regular news conference that he was worried about the debt problems in Europe.

“As the crisis within the EU intensifies … bilateral trade friction may be increased, which is detrimental to China-EU economic and trade relations,” he said.

“Of course, we believe there’s opportunity in the crisis. Everyone can work hard together to turn the crisis into an opportunity.”

Shen also said China is disappointed that it has not been recognized as a market economy under world trade rules by the EU, despite its rapid economic transformation.

“After 30 years of reform and opening up, China has completed the transformation from a planned economy to a market economy, but the EU still does not recognize China’s full market economy status. China is very disappointed,” Shen said.

Trade tensions with Europe are expected to rise, but will likely be contained, in part because of Beijing’s greater heft in negotiations resulting from its investment in European debt, said Liu Yuanchun, professor in international trade at Beijing’s Renmin University.

“Yes, we’re going to see more trade friction, but it will not turn up to be substantial,” Liu said.

In a commentary Tuesday, the government’s Xinhua News Agency called for an end to measures and attitudes that discourage Chinese investment in developed economies.

“It would help the United States and the EU break away from their current financial woes should they ditch protectionist measures and sincerely open their arms to Chinese investments, allowing China to make the most of its rich foreign exchange reserves,” the commentary said.

Beijing is Washington’s biggest foreign creditor and has appealed to US leaders to avoid taking steps in response to its economic woes that might erode the value of the dollar and China’s Treasury debt and other US assets.

The state-backed People’s Daily reported Tuesday that China will continue to buy US Treasuries.

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