China's Xi turns to panda diplomacy to seek EU trade deal

By Robin Emmott BRUSSELS (Reuters) - Chinese President Xi Jinping will use two pandas to break the ice and soften European opposition to a free-trade deal with China during a visit to Belgium which starts on Sunday. As the first Chinese leader to visit the European Union's headquarters since Brussels established ties with Beijing four decades ago, Xi will also seek to send a message that China is a less confrontational partner, ready to resolve trade disputes. "Our common interests far outweigh our differences," said China's ambassador to the EU, Yang Yanyi. "We need to explore ways to deepen our partnership." Xi will say hello to China's two ursine envoys Xing Hui and Hao Hao, loaned to Belgium last month, at a wildlife park near Brussels - part of a Chinese tradition of using pandas to foster better relations around the world. Chinese officials hope the "panda diplomacy" will strike a different tone from a year ago, when the EU and China narrowly avoided a trade war, and help Xi tackle difficult issues ranging from human rights to the West's tug of war over Ukraine. At the top of Xi's list is pushing the European Union to consider a multi-billion-dollar free-trade deal, a step that would dramatically deepen ties between two of the world's largest markets. Europe is China's most important trading partner. For the EU, China is second only to the United States but the bilateral relationship has been bedevilled by a series of damaging trade rows ranging from steel and wine to solar panels. "We should look at the broader picture. It will eventually benefit not only China but Europe," Yang said. British Prime Minister David Cameron told officials in China in December he was a strong advocate of such a free-trade deal. But most of Europe is wary. EU diplomats say most of the EU's 28 nations have resisted Chinese pressure to include a reference to a free-trade pact in the joint statement due to be released after the EU-China summit in Brussels on Monday. Trade between Europe and China has doubled since 2003 to more than 1 billion euros ($1.4 billion) a day, but Europeans accuse Chinese state-owned companies of receiving unfair subsidies that allow them to undercut foreign competitors. The European Commission, which handles international trade negotiations on behalf of EU countries, has said there must first be progress on an "investment agreement" under negotiation to make it easier for Europeans to do business in China. Still, trade tensions have lessened substantially since last year, when the Commission threatened to impose duties on 21 billion euros of Chinese solar panels imports and Beijing retaliated with its own measures. In the past two weeks, China has ended its own subsidy and dumping complaints against imports of European wine and polysilicon, which is used in solar panels. EU trade chief Karel De Gucht said last week he would no longer pursue an investigation into Chinese dumping of telecoms equipment, worth an annual 1 billion euros a year. But he still has concerns that Chinese companies Huawei and ZTE are receiving illegal subsidies. XI THE REFORMER Still, Xi's appetite for political and economic reform, coupled with his folksy style and the legacy of his father, a reformist former vice-premier, have raised hopes that Brussels has a man it can do business with. China unveiled its boldest reforms in nearly three decades in November, months after Xi, who is 60, became president. For Europe, the hope is better treatment of its companies in China and more access to the world's second largest economy. The European Union's top two officials, Herman Van Rompuy and Jose Manuel Barroso, will seek to hear more on that from Xi at the EU-China summit on Monday. "There are high expectations," Gerhard Sabathil, a senior EU official who works on China, said of the reforms. Sabathil also urged China to address EU rights concerns, ranging from the treatment of minorities to freedom of expression, although it was not clear if EU officials will raise such issues with Xi. China is also a central player in the Ukraine crisis. While Beijing has been cautious not to be drawn into the struggle between Russia and the West over Ukraine's future, the European Union will want to hear Xi's views. (Editing by Angus MacSwan)