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EU industry group says trade defences against China must stay

[BRUSSELS] European businesses from bicycles to steel will release a report on Thursday concluding that China has a state-led and subsidised economy and should not benefit from a change of global trade rules next year.

The alliance of more than 25 European industry associations, called Aegis Europe, believes China should not be granted market economy status at the end of 2016, as Beijing expects, and that to do so would threaten the survival of many European companies.

World trading powers including Europe are in a bind over whether a World Trade Organization protocol demands they treat China as a more market-based economy - a status that would make it harder for the European Union to protect local industry.

The issue is likely to be at the centre of an EU-China summit taking place in Brussels next week.

Aegis Europe's 372-page report, conducted by Munich-based consultancy Think!Desk, says the Chinese Communist Party plays a central role in the economy, with 71 five-year government plans and 22 national industrial-sector plans.

"The classification of China as a non-market economy constitutes a necessary 'air-lock' mechanism shielding the European market system from alien, distorting influences," the report concludes.

China joined the World Trade Organisation (WTO) in 2001, recognising that its local prices were not set by market forces.

WTO members can normally apply "anti-dumping" tariffs on others only if their export prices are below those in the exporter's home market. But with China, the EU and others have been able to ignore low domestic prices and set tariffs to make Chinese exports as expensive as products in wealthier countries.

Those WTO limitations on China appear to expire on Dec 11, 2016, though there is some room for interpretation.

China has already warned the EU to abide by WTO rules and not to resort to what it would consider protectionism.

Europe must take a decision soon on designating China a market economy, because granting that status will require legislative changes that must be approved by the European Parliament and translated into the bloc's 23 official languages.