* European Commission has another week to decide complaint
* Chinese industry has denied any unfair competition
* Premier Wen defends rare earths exports policy
By Andreas Rinke
TIANJIN, China, Aug 31 Chancellor Angela Merkel
said on Friday that Germany had no interest in starting a trade
war with Beijing over solar exports to Europe, but stressed that
China must take action to address distortions to fair
competition in the sector.
Beijing was also forced to defend its rare earths exports
policy on the second and final day of Merkel's China trip, with
Premier Wen Jiabao saying China was not intentionally holding
back exports amid a supply squeeze that has driven up prices.
China accounts for more than 90 percent of the global supply
of rare earths - essential for the defence, electronics and
During a visit to Wen's home city of Tianjin, just outside
of Beijing, Merkel made clear that China needed to make
concessions if it wanted to prevent EU action over the solar
The European Commission has until next Friday to decide
whether to launch an investigation into a complaint brought by
European solar firms and people familiar with the case believe
it may well go ahead and do so.
On Thursday, Merkel told reporters after talks with Wen that
she favoured negotiations over confrontation in the matter,
comments that were welcomed by the Chinese premier but stoked
concern in the European industry.
But on Friday she appeared to row back on her conciliatory
tone, saying Chinese solar firms needed to recognise that
subsidies, such as bottom-rate bank loans, distorted competition
and violated European law.
"We are not out of the woods yet," she said. "My plea is
that everyone be transparent, that they lay their cards on the
table about how they produce."
Last month a group of European solar companies, led by
Germany's SolarWorld, filed an anti-dumping complaint
against Chinese rivals with the European Commission.
Chinese solar firms have called on the Chinese government to
retaliate if Brussels decides to act on the complaint. The
United States imposed duties on solar panel imports from China
in May after a similar initiative led by SolarWorld there.
"Chancellor Merkel's comments may not be all that it takes
to prevent (trade) Commissioner Karel De Gucht from opening the
investigation," Vasiliki Avgoustidi, associate director at
Berwin Leighton Paisner LLP in Brussels, said.
In the last few years, Western solar firms have accused
Chinese peers of receiving lavish credit lines to offer modules
cheaply in Europe while protecting their own market.
Almost 60 percent of China's solar exports, worth $35.8
billion, were shipped to the EU last year.
CHINA DEFENDS RARE EARTHS POLICY
In another contentious trade matter concerning China's rare
earths, Wen said Beijing did not intend to curb its exports and
wants the issue resolved via cooperation rather than by filing
The World Trade Organization has said it will look into
complaints made by Europe, Japan and the United States over
China's limits on exports of rare earths.
China has been reining in its exports in recent years,
drawing the ire of trade partners who say the curbs are unfair.
China says the export restrictions are needed to help
protect the environment. It released a new round of rare earths
export quotas this month, raising its 2012 export quota to
30,996 tonnes, despite a crackdown on small producers.
"China is not restricting rare earth exports intentionally,"
the official Xinhua news agency paraphrased Wen as saying. "The
country has and is still offering a large portion of rare earth
on the world market."
Beijing has said it will abide by the outcome of an ongoing
WTO investigation, but will continue to tighten regulation of
"I support China and Germany to cooperate on the
development and use of rare earth as well as the utilization of
high technology in this process. This is much better than filing
trade complaints," Wen added.
Despite the 30,184 tonne export quota in 2011, China said it
shipped only 18,600 tonnes that year. The squeeze on supply has
led, in part, to a fourfold increase in export prices over the
past two years.