EU, China leaders meet amid growing trade disputes

By Sebastian Moffett and Kevin Yao

BRUSSELS (Reuters) - European Union and Chinese leaders will try to bridge growing differences over trade and find common ground on tackling Europe's debt crisis at a summit in Brussels on Thursday.

Overseas trade is one of few bright spots in Europe and a critical source of growth for the region's economy, which has slumped under the weight of the debt and banking crises, with EU gross domestic product falling and unemployment steadily rising.

Trade between China and the EU, the world's biggest trading bloc with a market of 500 million people, rose to 428 billion euros in 2011, having doubled in size since 2003.

Chinese companies are increasingly investing in Europe, while the Chinese government is an important buyer of the debt of euro zone governments. China's foreign exchange reserves are the world's largest at $3.24 trillion, and economists say roughly a quarter of that consists of euro-denominated assets.

At the same time, trade disputes are intensifying. In the latest spat, the European Commission accused China of selling solar panels below cost on the EU market, angering Beijing and threatening wider business ties.

Beijing has not linked purchases of EU government bonds to trade disputes, said Zhang Yongjun, an economist at the China Centre for International Economic Exchanges, a Beijing government think-tank.

"But the two issues concern the bilateral relations and cannot be separated."

An EU official played down the problems ahead of Thursday's summit, which he said would not be a summit for big decisions but rather a meeting focused on "consolidation".