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What China wants in exchange for spending big in Europe

Chinese Vice Prime Minister Li Keqiang is offering Chinese investment to a struggling Europe. In exchange, China wants improved trade ties with Europe.

By Correspondent / January 5, 2011

China's deputy premier Li Keqiang waves to the press before meeting Spain's King Juan Carlos at the Zarzuela Palace on the outskirts of Madrid Wednesday Jan. 5. Spain says it hopes to sign several important business accords during Li Keqiang's three-day visit to Spain.

Paul White/AP

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Madrid

Chinese Vice Prime Minister Li Keqiang is touring Europe, offering political support, cash, and investment at a critical juncture for the weakened European Union. However, there appear to be strings attached.

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While Mr. Li's visit saw the formalization of 16 business agreements with Spain worth $7.5 billion, mostly in the private industry, he has indicated that China is also looking for better trade ties with its new European business partners.

“We hope that the EU will relax restrictions on high-tech exports to China … and develop trade relations that are balanced and sustainable," Li wrote in an Op-Ed titled “China will be more open to the world” that was published Wednesday in the German daily Sueddeutsche Zeitung.

The message is clear, say analysts. Armed with foreign reserves of $2.7 trillion, China is offering its financial muscle to rescue a struggling Europe in exchange for technology and open borders.

“China has become the world’s fireman from a financial point of view. It operates the same way everywhere, and high tech is to Europe what commodities are to Africa,” says José Ignacio Torreblanca, senior fellow of the European Council on Foreign Relations. “And Europe doesn’t have a choice but to accept this.”

China’s good will is tied to political concessions, although not explicitly.

Speaking to business leaders in Madrid, Li said China would “stand by Spain is happiness and sad times,” that it would continue buying sovereign bonds, (depending on market conditions) and that it wanted deeper economic ties.

From Germany, China wants more openness for its expanding companies and more technological exchanges. From Europe as a whole, to which Li offered a new era in relations, China wants improved economic ties.

“It’s understandable that China has linked its support to progress in closer relation with the EU, lifting of restrictions, and improved potential to exchange high tech. That is still an issue for China and there are some expectations that further progress can be made there as a quid pro quo,” says Vanessa Rossi, senior research fellow on international economics and an expert on Chinese global economic expansion in London-based Chatham House.

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