China's premier Li Keqiang warns Europe over trade war

Chinese Premier Li Keqiang has weighed in on an EU investigation into the alleged dumping of Chinese solar panels.

(Financial Times) -- China's premier has waded into an intensifying trade dispute with Europe, warning that EU investigations into Chinese-made solar panels and telecommunications equipment would backfire by hurting European consumers.

"The cases over these two types of products will hurt Chinese industries, business and jobs and also damage the vital interests of European users and consumers," Li Keqiang said en route to Berlin on Sunday during his first foreign trip since becoming premier. "We express firm opposition."

Mr Li's comments mark the first time that China's top leadership has weighed in on the trade disputes, and come as the solar case -- the EU's biggest ever trade investigation -- enters a critical phase.

The EU must decide before June 6 whether to go ahead with a proposal from Karel De Gucht, trade commissioner, to impose provisional duties averaging 47 per cent on imported Chinese solar products for dumping, or selling goods below cost.

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EU member states were due to submit their reactions to the proposal by Friday. As the deadline approached -- and even over the weekend -- those supporting and opposing duties stepped up their lobbying campaigns to try to win over undecided governments.

On Sunday the vote appeared to be on a knife edge, with several people close to the investigation claiming as many as 15 of the 27 member states had opposed the duties. The commission declined to confirm this, and the numbers appeared to be fluid.

A spokesman for Mr De Gucht said the commission would "take note" of member states' positions. "At this stage, any potential temporary measures are an emergency response to rebalance the market place for European companies facing life-threatening dumping and unfair competition from China's solar panel industry," he added.

Under EU rules, the commission -- not the member states -- makes the final decision on provisional duties. Imposing them without majority backing from national governments would be an embarrassment for Mr De Gucht and weaken his hand as the investigation moves toward a final outcome in December.

Greg Barker, the UK's minister for energy and climate change, led a group of energy executives to Brussels last week to try to persuade the commission to drop the solar case. Philipp Rösler, Germany's economy minister, has also weighed in, publicly urging Mr De Gucht to negotiate a solution.

Zhong Shan, vice-minister of China's ministry of commerce, is set to meet the commissioner in Brussels on Monday to discuss the solar case, as well as a pending EU probe into China's telecommunications network equipment suppliers, Huawei Technologies and ZTE Corp. Mr De Gucht was given a green light from fellow commissioners to open an investigation after informing them he believes both companies benefited from illegal government subsidies, including cheap land and financing, and then dumped their products in Europe.

Mr Li made his remarks ahead of a visit to Germany, China's biggest EU trading partner and a potentially pivotal player in determining the outcome of the investigations.

At a press conference in Berlin on Sunday evening, Germany's Chancellor Angela Merkel said: "Germany will make every effort so that we make real progress in these talks."

Mr Li's remarks coincide with a comment piece in Monday's Financial Times written by Wu Hailong, China's ambassador to the EU, accusing Brussels of resorting to protectionism and remarking that its "repeated attempts to stir up trade frictions with China are astonishing and confusing".

Mr Wu said the trade cases were counter-productive at a time when the EU was still mired in recession and struggling to regain investor confidence. He also warned of broader damage to the bloc's reputation, writing: "The commission's actions have tarnished its image as an advocate of free trade, fuelled the rise of protectionism and run counter to the commitment by the leaders of the G20 group of industrialised nations not to introduce protectionist measures."