Mandelson warns China on 'trade frictions'

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The Independent Online

Peter Mandelson fired a warning shot across China's bows yesterday, saying the world's fastest growing economy needed to take action to avoid causing "trade frictions".

The European trade commissioner urged China to do more to avoid flooding the global textiles market with cheap imports in the wake of the recent abolition of quotas.

He urged Chinese leaders, who signed up to membership of the World Trade Organisation (WTO) three years ago, to put their weight behind efforts to restart the stalled trade talks.

He also called on China to abandon its currency peg with the dollar to relieve other currencies that are bearing the pain of the fall in the dollar.

At the start of a four-day tour of China, Mr Mandelson told students at the University of International Business and Econo- mics in Beijing that the country had new responsibilities.

"If there is a perception of a lack of equilibrium in China's trading practices, a negative reaction will be inevitable," he said.

He said he welcomed moves such as self-imposed export tariffs aimed at preventing a dramatic surge in exports that could "destabilise" world markets.

"But there is much concern that these measures will not be sufficient," he said. "I think some moderation ... in the rate of growth of Chinese textile exports ... will help ensure a harmonious adjustment to this new global trading environment."

He said Europe was looking to China to reform its banking system and enforce intellectual property rights "vigorously" to ensure both economic blocs were playing by the same rules.

China should "show leadership" in the run-up to the meeting of all 148 WTO members in Hong Kong in December that is seen as a make-or-break time for the success of the talks that were launched in 2001.

"In political terms, my few months in the job have already suggested to me that the [talks] won't succeed unless many developing countries are given the security that China will not take the lion's share of the round's benefits," he said.

On the currency issues, he said that China should link the yuan to a broader basket of currencies than just the dollar.

"Further reform beyond this will be essential for the perception that fair trading conditions exist, although I am of course aware of the importance for China of preserving financial stability," he said.

Mr Mandelson will meet with commerce minister Bo Xilai and vice-premier Wu Yi.