UPDATE 2-EU trade chief assures China Europe bonds are safe

* Spanish, Greek bonds won’t lose value, euro in good shape

* Opening up of procurement market may help Doha deal

* WTO case on raw materials is one EU will win
(Recasts lead, adds Lamy’s comments in paragraph 15)

By Farah Master

SHANGHAI, July 22 (BestGrowthStock) – 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.

RARE EARTHS

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.
[ID:nTOE66G00E]

Investment Research

UPDATE 2-EU trade chief assures China Europe bonds are safe