France, China urge balanced trade, monetary reform

France's President Nicolas Sarkozy and China's President Hu Jintao (L) speak to the crowd in Nice November 5, 2010, prior to a second round of talks between the two leaders.

NICE, France (Reuters) - France and China have reached a "real convergence" over the need to reform the global financial system, President Nicolas Sarkozy said after two days of talks with his Chinese counterpart Hu Jintao.

France told China that balanced trade and close cooperation was the best way to shield the world from future crises and the menace of protectionism, and China promised its support for Paris as it takes over the G20 presidency this month.

Sarkozy has big ambitions for his year at the helm of the Group of 20 leading economies and would score a coup if he can get Beijing to back his goals of finding ways to reduce volatility in commodity markets and diversify currency reserves.

Between talks with Hu in the Riviera resort of Nice and taking him for dinner near the city's promenade, Sarkozy told reporters Beijing had agreed to organise a seminar of experts in 2011 on reviewing the international monetary system.

The two leaders also discussed human rights, Sarkozy said, adding that he hoped France could encourage progress in that area through "gentle" dialogue with Beijing.

"There is a real convergence of views between China and France on the objectives to achieve," Sarkozy said of his aim to improve economic stability. "France's ambition is that everybody agrees to sit around the table to set down the bases of a new system that guarantees stability in the world."

NO TABOOS

The statement came as global anger at a fresh round of liquidity injections into the U.S. economy grew, notably from emerging nations and a highly critical Germany.

On human rights, Sarkozy said: "Hu Jintao is somebody with whom one can talk. There are many differences between the Chinese and the French but we covered all subjects."

"There is no taboo, notably on the issue of human rights," added Sarkozy, who also sat down with Hu in Paris on Thursday.

"To resolve the big problems in the world we need China, and a frank, constructive, amicable dialogue," Sarkozy said. "This is what we have been doing for two days.

Before Hu flew to Nice, French Economy Minister Christine Lagarde told Chinese officials and business leaders that Paris wanted much more balanced trade relations with Beijing.

Concerns over global trade imbalances, largely China's huge surpluses with Western nations, and the threat of "currency wars" will top the agenda at next week's G20 leaders' summit in Seoul, after which France takes on the group's presidency.

"The strength of our trade is the best defence against the real risks from the financial, economic and social crises which have struck all economies, including France of course and China, of which protectionism is the most ugly threat," Lagarde said.

France has not mentioned China's yuan currency, whose weakness has upset Washington and the European Commission, adopting a conciliatory approach it hopes will win over Beijing.

But Lagarde, who said on Thursday that the U.S. monetary easing had reinforced the need for a shake up of the global financial system, raised French concerns over China's handling of intellectual property rights and the openness of its markets.

"We're not necessarily very proud to owe China our largest commercial deficit, 22 billion euros," Lagarde said. "We must pass to a sustainable economic cooperation founded on both a fruitful friendship and responsibilities."

In response, Chinese Trade Minister Chen Deming said Beijing was not deliberately targeting a trade surplus and would welcome a more balanced relationship, but Europe must play a role by ensuring its own markets were open for Chinese investment.

RIGHTS CAMPAIGNERS ARRESTED

Hu's two-nation visit to France and Portugal comes at a time when EU leaders have closed ranks with Washington in urging China to let the yuan appreciate more quickly, unsettling relations between Beijing and Brussels. China hopes this week's trip will ease those strains before the Seoul summit.

Hu also oversaw with Sarkozy the signing of around $20 billion worth of airline, petrochemicals and nuclear fuel deals, including contracts to buy 102 Airbus (EAD.PA) planes.

Human rights groups have accused Sarkozy's government of selling out to win Chinese favour.

The Reporters Without Borders group said six people were arrested when protestors called for the release of a jailed Chinese dissident awarded the 2010 Nobel peace prize as Hu's car passed them on the Champs Elysees. Police snatched away their big white umbrellas with "Free Liu Xiaobo" written on them.

"It is unthinkable that France, the country of human rights, is saying nothing about the situation of China's dissidents," said Reporters Without Borders head Jean Francois Julliard.

In Beijing, a senior Chinese diplomat warned European nations against supporting Liu.

Sino-French relations have only slowly recovered since Sarkozy outraged Beijing in 2008 by meeting the exiled Dalai Lama, prompting some Chinese citizens to boycott French goods.

(Additional reporting by Daniel Flynn, Yann Le Guernigou, Jean-Baptiste Vey and Antony Paone; Writing by Catherine Bremer; editing by David Stamp)