By Philip Blenkinsop and Robin Emmott
BRUSSELS (Reuters) - European governments pressed China on Friday to allow greater foreign investment in its economy, using a two-day summit with Asian leaders to push back against U.S. protectionism but facing familiar resistance from Beijing over state subsidies.
At a biennial Asia-Europe Meeting bringing together leaders representing 65 percent of global economic output, France, Britain, Germany, Italy and the European Commission held private meetings with Chinese Premier Li Keqiang, hoping for greater access for EU companies to the world's No. 2 economy.
Li told British Prime Minister Theresa May that he "looked forward to ushering in a diamond era" after their bilateral meeting, a British government statement said.
In a sign of China's outsized role, Li led the pack of European and Asian leaders along the summit red carpet and stood in the centre of the 50 other leaders for a photo, alongside Merkel and the summit chair, European Council President Donald Tusk.
China has been promising for years to ease restrictions on foreign investment, but Western governments say little has changed and many are worried that Beijing is heading towards more state control under President Xi Jinping.
China restricts foreign investment more than the EU in every sector except real estate, according to a report by the Rhodium Group consultancy.
French President Emmanuel Macron held talks with Li on Thursday evening, lobbying for better access to China's poultry, dairy, pharmaceuticals, services and financial services sectors, a French official said.
But there was no sign of a breakthrough. "Some gestures have been made, but it must go further now," the official said.
SYMPATHY OVER TARIFFS
China did appear to win some sympathy for U.S. President Donald Trump's tariffs on billions of dollars of its exports.
Russian Prime Minister Dmitry Medvedev, visiting Brussels on official business for the first time since Moscow annexed Crimea in 2014, told his counterparts: "At this table, there are the leaders of countries that have experienced the signs of those trade wars in full. And it is, probably, the saddest thing that is happening now."
A final summit communique was set to omit a call for an end to government trade distortions, according to the latest draft and EU diplomats.
China requested the changes at talks between senior EU and Asian officials overnight, two diplomats said. The statement will instead commit to "free and open trade on a level playing field" and to fighting "all forms of protectionism", in an indirect reference to Trump's tariffs on Chinese imports.
The earlier draft, seen by Reuters, had called for "the elimination of unjustifiable market distorting measures by governments".
The European Union and the United States accuse China of directly funding state companies through Chinese banks to help them to dominate global markets, breaking rules set down by the World Trade Organization, of which China is a member.
The EU also wants China, which produces and consumes half the world's steel and has cut some 220 million tonnes of manufacturing overcapacity since January 2016, to reduce its capacity further.
SINGAPORE DEAL
After sessions on improving connectivity and the multilateral system and a host of bilateral meetings, the summit was due to finish on Friday with the EU signing an agreement with Singapore Prime Minister Lee Hsien Loong.
That pact has been eight years in the making. Negotiations ended in 2014, but as protests mounted against other trade accords, such as one planned with the United States and one struck with Canada, the deal was sent for approval to the European Court of Justice
The Commission hopes the agreement, which still needs the backing of the European Parliament, will take effect next year.
It would likely follow a larger free trade agreement that the EU plans with Japan, and would be the EU's first trade agreement with a member of the 10-strong Association of Southeast Asian Nations (ASEAN).
The EU remains interested in a deal with ASEAN, after talks were shelved in 2009. In the meantime, it has agreed a trade accord with Vietnam, is in negotiations with Indonesia, and has held talks with three other ASEAN members.
(Additional reporting by Daphne Psaledakis, Michel Rose, Noah Barkin and Vladimir Soldatkin, Editing by Kevin Liffey)
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