http://www.ft.com/cms/s/0/a2711f68-ce7f-11e2-8e16-00144feab7de.html?ftcamp=published_links%2Frss%2Fglobal-economy%2Ffeed%2F%2Fproduct#axzz2Vk4QQ100

China says EU must recognise its decline amid trade war

By Kathrin Hille in Beijing

China has warned Europe that its failure to recognise its power is declining is  inviting further retaliation from Beijing in their escalating trade row.

¡°The change of the times and the shifts of power have failed to change the  condescending attitude of some Europeans,¡± People¡¯s Daily, the ruling Communist  party¡¯s mouthpiece, said on Thursday. ¡°China doesn¡¯t want a trade war, but trade  protectionism cannot but trigger a counterattack.¡±

It said that Beijing could take yet more measures against the EU. ¡°We have  set the table for talks [yet] there are still plenty of cards we can play,¡± the  newspaper wrote.

The angry editorial was published under the name ¡°Zhong Sheng¡±, a pen-name  that sounds the same as ¡°Voice of China¡± and is seen as authoritative  representation of official views. Other state media carried similar  commentaries.

Beijing is hitting out after Brussels imposed  duties this week on solar panels imported from China. On Wednesday, the  Chinese government responded by launching an anti-dumping and anti-subsidy  investigation against European wine.

But this was seen as a symbolic move in that wine exports to China come  largely from states who support the solar tariffs move, such as France, Spain  and Italy, while Germany ¨C which Beijing regards as the true power of the union  ¨C has made its disapproval of Brussels¡¯ hardline position clear.

While China has said it would welcome negotiations on the solar panel case,  the People¡¯s Daily is correct in saying that Beijing has ¡°plenty more cards¡± to  play. Wine exports represent a tiny fraction of the €433.6bn in bilateral trade  between China and the EU.

¡°If the EU thinks that it can safeguard its interests through sanctions, it  will have to realise that it is no longer facing the China of the past,¡± said  Chen Zhimin, a professor specialising in EU diplomacy at Fudan University in  Shanghai.

Thursday¡¯s tirade follows years of pent-up frustration at Europe¡¯s eroding  power and what Chinese officials see as the group¡¯s complex and inefficient  policy making and decision mechanisms. Increasingly, Chinese officials have been  trying to deal with national governments instead of Brussels and Beijing has  sent strong messages that it sees Germany as a leader in Europe.

The People¡¯s Daily article reflects this and specifically targets the  Brussels bureaucracy. ¡°Europe¡¯s decision system has run into problems,¡± it said.  ¡°Despite clear opposition from a majority of the member countries, the trade  commissioner [Karel] De Gucht stirred up trouble in such a complicated and  sensitive issue. That is abnormal,¡± it said.

But the editorial¡¯s language is also likely to touch a nerve outside the EU  as it adds to growing rhetoric out of Beijing emphasising China¡¯s aspiration to  great power status and the decline of the West.

Ahead of his summit with US  President Barack Obama on Friday in California, Xi Jinping, the party chief  who took over as China¡¯s president in March, has expressed the hope that the two  countries can move to a ¡°new type of great power relationship¡±.

In the West, the phrase, in combination with Mr Xi¡¯s rhetoric about  a ¡°Chinese dream¡± and the ¡®great rejuvenation of the Chinese nation¡¯ has  been read as a sign that China is becoming more overt in its pursuit of global  power.

¡°We are now looking at a Beijing which positions itself as an equal to the US  and superior to a lot of smaller nations,¡± said a Western diplomat.

Prof Chen said a majority in China would agree that the EU¡¯s slower growth  rates compared with many emerging markets had left it in relative decline. ¡°In  addition, the EU faces a lot of problems,¡± he said. ¡°If it continues down this  path, it will be declining absolutely.¡±

Additional reporting by Zhao Tianqi