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EU trade chief assures China Europe bonds are safe

Source: Reuters - Thu 22th Jul 2010

The European Union's trade chief assured China on Thursday that its investments in Europe were safe, particularly the bonds it had bought from debt-laden Greece and Spain.

Bonds from Spain and Greece were a good investment for China and would keep their value, European Trade Commissioner Karel De Gucht said.

He estimated that China had spent around 420 million euros buying Spanish and Greek bonds, but could not confirm it.

"There is no risk at all to the Chinese treasury" he said in a speech at the Shanghai World Expo.

"China's presence in Europe is visible across the board whether in China's recent purchase of several hundreds of millions of euros of government bonds in the euro zone, particularly Spain or Greece, or in other large-scale investments too, such as the acquisition of Volvo by the car maker Geely" De Gucht said.

He was confident Europe's salvage package of 860 billion euros ($1,097 billion) had been very effective in easing the sovereign debt crisis.

"I am quite confident that the euro is in good shape again."

Chinese leaders have expressed concern over Europe's bid to contain debt, which poses a risk to global economic growth.

Global concerns over China's protection of intellectual property has flared up in recent months and De Gucht said European companies were becoming increasingly worried.

Indigenous innovation policies, where China encourages government departments to buy locally made products from Chinese companies, would force European firms to register as a Chinese company in order to get access to the public procurement market.

However, De Gucht said China had already started to respond.

"Some changes were made to the indigenous innovation legislation that is certainly accommodating to a certain extent some European worries" he said.

China has revised its offer to join the World Trade Organisation's government procurement agreement (GPA). Members of the sub-group, mostly wealthy developed countries, pledge to give each other reciprocal access to government tenders and purchases.

De Gucht said the opening up of the public procurement market would help resolve the Doha round of trade negotiations if a substantial package was reached.

Separately, WTO Director-General Pascal Lamy said China was abiding by its commitments to the global trade body and its latest offer to join the GPA was better than previous proposals.


De Gucht also said that the EU's case against China on access to its raw materials, a hot topic in Europe, was likely one it could win at the WTO.

"We have a lot of understanding that a fast-growing economy needs a lot of raw materials, but it is not the right way because it creates monopolies which distort the market" he said.

China holds about 90 percent of the world's reserves of rare earth materials, used in electronic devices, digital displays and military applications.

Foreign traders, manufacturers and military strategists have grown increasingly vocal about Chinese moves to reduce the volume of exports of rare earths.

China, however, says export controls prevent wasteful exploitation, support volatile international prices and encourage high-tech manufacturers to shift operations to China, where rare earth prices are cheaper.

China will not block exports of rare earth metals, premier Wen Jiabao told a German trade delegation this month.

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