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China tries to avoid free-trade pledges of European economy

According to survey released ahead of European Union leaders’ visit, China is trying to avoid fully carrying out its free-trade pledges.

The report by the European Chamber of Commerce in China adds to mounting complaints that Beijing is violating World Trade Organization commitments by trying to nurture Chinese companies at the expense of foreign rivals.

"People see that government bodies are trying to avoid (carrying out WTO pledges) more actively, so that is bad news," Joerg Wuttke, president of the European chamber, said at a news conference.

European leaders plan to lobby China to lower barriers to imports and foreign investment and ease currency controls when the two sides meet next week in Beijing, according to EU officials.

Europe has shown greater urgency lately about pressing China for action to narrow its swelling trade surplus, an area where Washington has long taken the lead in lobbying Beijing.

Both the U.S. and EU accuse China of improperly using tax, investment and other policies to promote the growth of Chinese champions in industries ranging from oil to banking while putting foreign companies at a disadvantage.

The investment climate is "not getting better," said Wuttke, who is the China manager for German chemical company BASF AG. He cited rules on auto parts imports and access to its retail gasoline and diesel market as areas where China is violating promises to give foreign companies equal treatment.

The number of European companies complaining about China's rampant product piracy is about the same as last year, he said.

The EU delegation is led by the president of the European Commission, Jose Manuel Barroso, and Prime Minister Jose Socrates of Portugal, which holds the rotating presidency of the 27-nation group.

Also next week, European currency officials are to meet separately with Chinese officials to seek an easing of controls on China's currency, the yuan. The EU, United States and other trading partners say the yuan is kept undervalued, giving Chinese exporters an unfair price advantage and adding to the country's surplus.

China 's trade surplus with Europe , its biggest trading partner, rose nearly 50 percent to US$13.9 billion ( EUR 9.5 billion) in October over the same month in 2006, according to the government.

The survey of 220 European companies found "the majority are skeptical about the government's ability and willingness to implement WTO regulations," said a report by the European chamber.

Some 38 percent thought Beijing is "actively seeking loopholes to circumvent, avoid or delay" carrying out WTO pledges, it said.

Such sentiment was strongest among companies selling consumer goods and professional services such as accounting, the chamber said.

The American and European chambers of commerce both have complained that regulators are trying to protect Chinese companies by obstructing foreign investment in banking and other industries.

Washington has filed a WTO case challenging China's use of different tax rates to encourage automakers to use domestically made parts. Foreign oil companies that want to set up filling stations say they face obstacles because China 's refineries are controlled by two state companies.

At the meetings next week, "we hope that the leaders of both nations will discuss opening their markets or keeping them open and try to get rid of protectionist arguments in both regions," Wuttke said.

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