China's Wen soothes on rare earths,investment worries

File photo of Chinese Premier Wen Jiabao smiles as he watches a performance put up by students during his visit to the Chinese Culture Center in Seoul May 29, 2010.

XI'AN, China (Reuters) - Chinese premier Wen Jiabao told a German trade delegation that China would not block exports of rare earth metals, while disputing allegations that China's investment climate has worsened for foreign businesses.

European and American business associations have expressed concern over the past year at Chinese policies that favour procurement of goods and services with "indigenous innovation" as well as China's promotion of national standards instead of international norms for technology and equipment.

German business leaders called for open access to Chinese markets, better intellectual property right protection, and equal access to resources including rare earth minerals.

"Currently, there is an allegation that China's investment environment is worsening. I think it is untrue," Wen said in response.

Wen said China would never block the export of rare earth minerals to foreign countries, but said minerals should be exported at a reasonable price and volume, the Xinhua news agency reported. Those remarks were not made in the presence of foreign reporters.

Wen said foreign firms would be given the same treatment as Chinese firms if they manufacture in China.

Access to the Chinese market is particularly important to German firms, many of whom still enjoy active exports to China but worry about losing ground as Chinese manufacturers move up the value chain.

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

"I am worried about the conditions for access to these materials," visiting German Chancellor Angela Merkel said.

Earlier this month, Chinese media reported a new central government plan to fix monthly prices for rare earth metals in the five provinces that hold much, but not all, of the known Chinese deposits.

Foreign traders, manufacturers and military strategists have grown increasingly vocal about Chinese moves to reduce the volume of exports of rare earths. Chinese planners say export controls will prevent wasteful exploitation, support volatile international prices and encourage high-tech manufacturers to shift operations to China, where rare earth prices are cheaper.

For their part, Chinese businesses also used the trip to pressure German officials to move on issues of interest to foreign investors in Europe. Chinese shipping firm COSCO said the port in Hamburg needed to be deepened in order for its ships to continue to dock there.

(Additional reporting and writing by Lucy Hornby in Beijing)