| HEFEI, China
HEFEI, China Chancellor Angela Merkel said Germany favoured granting China "market economy status" in principle - a shift that would make it harder for the EU to protect local industry from Chinese competition - but said Beijing still had work to do.
The European Union and other members of the World Trade Organization (WTO) have to decide at the end of 2016 whether to grant China "market economy status" (MES).
The WTO recognised when Communist China joined the body in 2001 that local prices were not set by market forces, but expected that 15 years later Beijing would play less of a role in directing the economy.
During her two-day visit to China, Merkel said on Friday that the world's second biggest economy still had some work to do before it could be granted MES and the status would also be subject to checks by the European Commission.
"Germany supports, in general, China's claim to get the market economy status. At the same time China has to do some homework, for example in the area of public procurement," Merkel said while visiting the eastern Chinese city of Hefei.
"But we want to advance the process," she added.
Aegis Europe, a grouping of 30 European industry federations from steel to ceramics, said that granting China market economy status would allow unlimited Chinese dumping and destroy further industries in Europe.
"We must strengthen the point that Mrs Merkel has made that China has a lot of work to do become a market economy," said Aegis spokesman Milan Nitzsche, who is also a vice president of German solar panel maker SolarWorld.
Aegis forecast last week that the EU's trade deficit with China would hit a record high of 180 billion euros ($199 billion) this year even with EU anti-dumping duties imposed on around 50 products from China, including bicycles, solar panels and various grades of steel.
At a German-Sino business congress in Hefei, Merkel called for better protection of the steel and solar industries against unfair international competition, a complaint some manufacturers make against China.
Merkel said the steel sector needed "a certain amount of market protection" as steelmakers have pointed out that environmental regulations differ from country to country, impacting cost advantages.
"I also hope that we can extend the rules already in place in the solar sector," she added.
China makes nearly half the world's 1.6 billion tonnes of steel and experts estimate its mills have about 300 million tonnes worth of excess steelmaking capacity.
Chinese Premier Li Keqiang, speaking during an appearance with Merkel in Hefei, said Germany and China wanted to come to an agreement by 2016 to stop computer-based industrial espionage.
Merkel had already said on Thursday that Germany wanted both sides to agree to abstain from industrial espionage.
(Additional reporting by Philip Blenkinsop in Brussels; writing by Ben Blanchard and Michelle Martin; Editing by Simon Cameron-Moore and Gareth Jones)