By Ethan Bilby and Charlie Zhu
BRUSSELS/HONG KONG (Reuters) - The European Commission rejected Chinese trade association statements that talks to resolve a dispute over allegations of dumping of solar panels had broken down, while Chinese comments highlighted risks the dispute could escalate.
EU regulators agreed to impose solar panel duties averaging 47 percent earlier this month following a investigation launched by a complaint from German manufacturer SolarWorld
The dispute has the potential to impact 21 billion euros (17.9 billion pounds) worth of imported Chinese solar panels, cells and wafers from manufacturers such as Trina Solar
China's Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME), a government-backed Chinese industry association authorised to represent Chinese solar companies, told reporters in Beijing on Wednesday that it had made an offer during a visit to Brussels but was rebuffed by the European Commission.
"These claims are simply wrong and misleading for one simple reason - no formal negotiations are yet ongoing between the EU and China in the solar panel anti-dumping case," EU trade spokesman John Clancy said in a statement on Thursday.
EU currently accounts for about half of China's solar exports, which have already been hit hard by the euro zone debt crisis that had forced major European countries like Germany to slash subsidies for renewable power.
The United States last year slapped anti-dumping duties on solar cells imported from China. The European Commission said on May 8 it would take similar action. Both Washington and Brussels accuse the Chinese of selling panels below cost.
"If the EU does slap the duties, it will really mess up the Chinese solar industry. It will worsen the industry glut and many factories, especially small ones, will have to close down," Sun Haiyan, a top executive at Trina Solar, told Reuters.
CCCME said in a statement that "because the European side did not show sincerity to solve the problem through negotiations, this first round of negotiations ended in no result and broke down".
The EU's Clancy responded, "These technical preparatory talks have nothing to do with a proper negotiation." He said the Commission could not comment on the content of those discussions.
He added that according to EU law, formal negotiations could begin only after "preliminary findings" from the investigation are published in the EU's Official Journal.
CCCME made an offer for producers to voluntarily raise their prices to avoid duties during informal talks last week, a Chinese source familiar with the negotiations, said. "They have shown no flexibility, so it makes China very angry. It is quite rare for the export chamber to hold this type of press conference."
He said that EU regulators had insisted that they would accept only a price level consistent with the amount regulators say Chinese firms undercut European producers, which would amount to a markup of 47 percent.
"If they have carried out their tariff and they still insist on the high level of the price offer, then there is no need for us to negotiate, and China will have to respond in another way," the source said.
Chinese solar cells and modules would be completely priced out of the European market if the EU slaps the anti-dumping tariffs, Chinese industry executives say. Currently, Chinese solar panels are sold to EU countries at about 0.5 euro per watt, including freight costs, versus 0.60-0.65 euro per watt for local European products, according to a sales executive at another U.S.-listed Chinese solar panel maker.
Chinese solar panel companies have been seeking to diversify further into what they call "emerging solar markets" like Japan, South East Asia, the Middle East and Latin America in face of the EU anti-dumping threat.
Beijing says the EU duties would seriously harm trade ties and that it is expected to decide in June whether to levy its own duties on imported European solar-grade polysilicon, a raw material used in solar panel production.
The source said it was also possible that China could open an anti-dumping investigation into EU wine, but pressure on the Chinese government by the Chinese solar industry and domestic media could lead to a larger response.
"If the EU side really cares about the 47 percent tariff in June, then that kind of response is not enough," he said. "They will want to really hurt the EU."
(editing by Jane Baird and Neil Fullick)
By Koh Gui Qing
BEIJING (Reuters) - As evidence mounts that China's economy is losing momentum, economists are fast abandoning their rosy recovery forecasts and bracing for what could be the country's slowest growth rate in 23 years.
In the space of five months, analysts have swung from confidently predicting a modest pick-up in the world's second-biggest economy to pondering the chance that China will miss its own 7.5 percent growth target this year.
Concerns that Beijing's growth target may be under threat came to the fore on Thursday, when a preliminary survey of Chinese factories showed manufacturing activity shrank for the first time in seven months in May after both new domestic and export orders fell.
"Yes, the 7.5 percent target is under threat," said Ken Peng, an economist at BNP Paribas in Beijing.
"China does not have a recession, but there will not be a recovery."
Unlike previous years when any wobble in the Chinese growth engine was countered with heavy government intervention to stabilise activity, economists are counting on things being different this time.
There will be no big-bang stimulus like the 4 trillion yuan (431 billion pounds) package unveiled after the 2008/09 financial crisis to spur growth, analysts say. Instead, leaders appear to be banking on China adjusting to a new norm of slower and hopefully better-quality growth that requires less state planning.
Sources close to Beijing told Reuters this week that China's plan to spend $6.5 trillion to urbanise its economy is running into snags as the government weighs the pros and cons of another spending binge that would escalate local debt problems and likely add to inflationary pressures.
Just how much growth will cool without policy action is difficult guesswork, but a string of underwhelming Chinese economic data have led some economists to contemplate worst-case scenarios of growth sinking below 7 percent in 2013.
"What investors are worried about is whether the situation in China right now is a lot more menacing than growth slowing to the 7 handle," Tao Wang said in a note this week after cutting her 2013 gross domestic product forecast to 7.7 percent, from 8 percent.
It was always a close call.
Forecasts of a mild economic revival in China were predicated on activity picking up to 8 percent in 2013, quickening a shade from last year's 7.8 percent, which was the worst showing in 13 years.
And calls for an economic cooldown now centre on growth dipping below 8 percent, but still above the government's increasingly-vulnerable 7.5 percent target.
The last time China's growth sunk below 7.5 percent was in 1990, when the economy expanded by just 3.9 percent.
Even before Thursday's dismal survey results of Chinese factories, a host of banks had started slashing their 2013 growth estimates for China, and more are set to do so.
Bank of America-Merrill Lynch pared its growth forecast this month to 7.6 percent from 8 percent, Standard Chartered cut its estimate to 7.7 percent from 8.3 percent, and ING last month reduced its prediction to 7.8 percent from 9 percent.
BNP Paribas, Credit Suisse and Societe Generale are all in the midst of revising their 2013 growth forecasts.
To complicate matters, analysts cite different reasons for what is hobbling China's economic growth, which unexpectedly eased in the first quarter after an initial promising rebound fizzled in just three months.
Lacklustre wage growth, which is at a five-year low, is the biggest drag on consumption, some say. A government campaign to curb wasteful public spending is also hurting retail sales.
Others say anaemic growth in factory output and trade is offsetting resilient investment, while some argue that government infrastructure spending has waned amid tighter state controls over alternative financing.
Global demand also has remained stubbornly weak, with the euro zone now in its longest-ever recession, offsetting some signs of improvement in the United States.
One of the rare points of agreement is that China's property sector - the one industry that the government wants to slow - is ironically on a rebound.
The other is that China's days of double-digit economic growth rates are over, and that the economic structure needs to be changed to let consumption overtake investment as the most important driver of growth.
"What the last couple of months has shown is that we have exhausted this China growth model and what we need now is the next China growth model," said Alistair Thornton, an economist at IHS. ($1 = 6.1340 Chinese yuan)
(Editing by Kim Coghill)