EU seeks to ease China's euro zone fears

By Ben Blanchard

BEIJING (Reuters) - Europe will not let the euro fail and European Union countries are committed to cutting deficits, the president of the European Council told Chinese officials on Tuesday, seeking to ease fears that the euro zone crisis could imperil China's investments.

"All EU countries are bringing down public deficits. The most vulnerable countries are undertaking determined action to come out of the crisis," President Herman Van Rompuy said in a speech at the Central Party School in northwest Beijing, which trains rising Chinese leaders.

His four-day China visit has coincided with a deterioration in Europe's 18-month sovereign debt crisis, with growing concerns that Greece could be forced to restructure its debts and Ireland and Portugal also coming under pressure.

China signaled last month that it was ready to buy more debt from the euro zone's weaker states. There are no precise figures, but China has said it has bought billions of euros of debt.

"The euro is the world's second reserve currency and a strong and stable currency -- even too strong, compared, for instance, to your currency," said Van Rompuy, who represents EU governments.

"We are determined to defend and develop these assets, to the benefit of our citizens and in a dialogue with partners.

"I want to acknowledge the confidence that China has demonstrated toward Europe in those difficult moments. A stable euro zone is in our common interest," Van Rompuy said in remarks to officials studying at the sprawling school.

Van Rompuy said that Greece and Ireland had received financial assistance attached to strict policy measures and that an agreement with Portugal had been reached.

"And allow me to remind you that although these countries enjoy a disproportionately high attention of international press, together they represent only 6 percent of the euro zone's GDP," he said.

Van Rompuy noted the strengthening of banking regulation and EU's economic recovery, with expectations of 1.8 percent growth in the EU this year, and 2 percent growth in 2012.

"From the European side, our main contribution to stability for the world economy is first of all to put our house in order, stronger governance of the euro zone, and tackling the problems of weak economies and weak budgets," he said.

TRADE TENSIONS

Van Rompuy's trip comes amid a flare up in trade tension between the two, whose trade in goods was valued at nearly 400 billion euros ($579.8 billion) last year.

China hit the European Union with its first anti-subsidy duties on Monday, just days after the EU imposed a five-year increase in duties on imports of Chinese glossy paper in its first challenge to Chinese state subsidies.

Chinese Commerce Ministry spokesman Yao Jian, however, sought to downplay the recent disputes, saying they did not amount to a trade war.

"China-EU trade relations are very close ... accounting for around 1/10th of global trade, so if there are some legal disputes over trade between the two it's not at all strange," Yao told a regular news briefing.

The two also do not see eye-to-eye on the thorny subject of human rights.

Van Rompuy delicately pressed again on rights and democracy, in his speech to the Communist officials who will one day be charged with running the one-Party state, saying the world should learn a lesson from the present Middle East tumult.

"For us, the 'Arab Spring' has been a clear reminder that the values of justice, democracy and social development are universal," he said.

China's leaders are increasingly unyielding in the face of Western pressure but also wary about what they see as foreign-inspired dissent and subversion.

That alarm only grew after overseas Chinese websites in February spread calls for protests across China inspired by the "Jasmine Revolution" of anti-authoritarian uprisings across the Arab world.

China has this year jailed, detained or placed in secretive informal custody dozens of dissidents, human rights lawyers and protesters it fears will challenge Communist Party rule.

(Additional reporting by Michael Martina and Aileen Wang; Editing by Alex Richardson)