During her three-day trip to the world’s second largest economy, Merkel praised the advantages of the single currency and urged China to put pressure on Iran and to condemn Syria at the United Nations.

Merkel, who was prevented from meeting journalists and a human rights lawyers, ended her official visit in the southern city of Guangzhou, Xinhua news agency reported.

Merkel, who held talks with Premier Wen Jiabao and President Hu Jintao during her visit, had said that she would raise human rights issues during the trip.

She attended a business forum with Wen, who Friday said China had neither the intention nor ability “to buy Europe”.

Experts believe China holds more than $550 billion of European sovereign debt, although the figure has not been officially confirmed.

Merkel and French President Nicolas Sarkozy will preside Monday over the 14th Franco-German council of ministers, which will be largely devoted to the eurozone financial crisis.

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The Foreign Ministry said Friday the recent activity had taken place within Chinese-controlled waters and was completely normal. A ministry statement said China was strongly dissatisfied with recent comments from Japanese officials.

Japan’s chief Cabinet secretary on Wednesday said Japan protested to China after a flare was seen a day earlier at a Chinese structure at an undersea gas deposit.

The deposit, known as Kashi in Japan and Tianwaitian in China, sits near a median line in the countries’ overlapping exclusive economic zones.

Japan and China agreed in 2008 to suspend unilateral exploration in that field while continuing talks.

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China is “willing to cooperate with Europe to fight the current crisis. Some people say this means China wants to buy Europe”, Wen told a German-China business forum in the southern city of Guangzhou.

“This a concern and doesn’t fit reality. China doesn’t have this intention and doesn’t have this ability.”

German Chancellor Angela Merkel, in China for a three-day visit to boost her host’s confidence in Europe, also attended the forum along with executives from the energy, chemicals, engineering, banking and electronics sectors.

There are growing concerns in Europe that a recent wave of investment by Chinese companies and government-backed funds will give Beijing too much influence over struggling European economies.

In the latest deal, China State Grid has agreed to pay 387 million euros ($508.2 million) for a 25 percent stake in the national electricity grid of debt-stricken Portugal, Treasury Secretary Maria Albuquerque said Thursday.

European leaders have called on China, which has the world’s largest foreign exchange reserves, to invest in a bailout fund to rescue debt-stricken countries.

China has so far made no firm commitment to provide financial assistance, although Wen said Thursday it was considering getting more involved in bailout funds through the International Monetary Fund.

Analysts say bargain-hunting is behind the recent acquisitions by Chinese companies seeking to expand overseas. The country’s sovereign wealth fund has also sought to diversify away from US bonds.

At the forum Wen also touched on the politically sensitive topic of rare earths — 17 elements crucial in the manufacturing of many high-tech products — amid accusations China unfairly restricts exports of the valuable minerals.

China — the world’s largest producer of rare earths — “has no discrimination when it comes to foreign companies”, Wen told the forum.

State media said this week Beijing was bracing for renewed calls to ease its rare earths controls after the World Trade Organization ruled the country’s limits on key raw material exports broke trade rules.

Merkel, who earlier Friday held talks with President Hu Jintao and the country’s top legislator Wu Bangguo in Beijing, had said that she would raise human rights issues during her visit.

Rights lawyer Mo Shaoping, whose clients include jailed Nobel Peace Prize winner Liu Xiaobo, told AFP Friday that police had prevented him from meeting with Merkel at a reception at the German Embassy on Thursday.

Mo said police told him he was not allowed to attend the meeting due to concerns over social stability ahead of a key Communist Party meeting slated for late this year that will usher in a 10-yearly leadership transition.

The German embassy in Beijing did not immediately comment on the absence of Mo, who also defended the jailed rights lawyer Gao Zhisheng.

Merkel’s visit to Guangdong province will include a meeting with Gan Junqiu, the state-backed Catholic bishop of Guangzhou — the provincial capital — a German diplomatic source said, before returning to Germany on Saturday.

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China “is investigating and evaluating concrete ways in which it can, via the IMF, get more deeply involved in solving the European debt problem through [European Stability Mechanism/European Financial Stability Facility] channels,” Mr Wen said in a joint press conference with German Chancellor Angela Merkel in Beijing.

The comments have revived hopes that China, which holds by far the world’s largest foreign exchange reserves, could add some of this $3.2tn cash pile to existing and future European bail-out funds.

European officials said they believed Beijing had clearly changed its position and more concrete terms of any Chinese contribution were likely to be discussed in two weeks at a delayed EU-China summit.

Mr Wen said it was increasingly “urgent” that a solution be found to the European debt crisis and he called on the international community to co-operate towards that end. The euro rose about half a per cent against the US dollar soon after his words were reported.

Chinese officials have long signalled their willingness to contribute to global efforts to bail out Europe but have also made clear Beijing would not take the lead and would like to see more convincing efforts from Europe’s own governments to resolve the crisis.

European leaders last year agreed to leverage the approximately €250bn left in the eurozone’s rescue fund, the European Financial Stability Facility, as a way to make the EU’s dwindling bail-out resources go further.

One option would be for China to put money into a so-called “co-investment fund” which Klaus Regling, the EFSF chief, has been promoting to public and private investors across the world, including Chinese sovereign wealth funds.

Ms Merkel is in China on a three-day mission to reassure Beijing that Europe is able to tackle its mounting debt problems.

She told an audience of Chinese scholars on Thursday that European countries were taking serious steps to rein in debt and strengthen growth.

“I want to tell you: The euro has strengthened Europe,” Ms Merkel said in a speech at the Chinese Academy of Social Sciences, one of the country’s leading academic institutions, which functions as a think-tank for the government. “This is not a crisis of the euro, it is a debt crisis and a crisis of different levels of competitiveness,” she said.

Ms Merkel’s visit comes just days after the EU decision to make the budget discipline required from the 17 euro economies part of national law, which she had been pushing for strongly.

Ms Merkel, who is scheduled to meet President Hu Jintao on Friday, also stressed that she would press her Chinese counterparts to support actions against Iran and Syria, two of the countries that top the global political agenda.

Acknowledging Beijing’s opposition to a new round of sanctions against Iran, Ms Merkel said it could use its influence to tell Iran to be more transparent about its nuclear programme.

But questions from the audience showed that China’s focus is clearly on Europe. Ms Merkel said the financial crisis required every eurozone member country to “do their homework”, but also solidarity among the group, and claimed that Europe was growing together in the crisis.

That contrasts with Chinese perceptions that the euro group is plagued by frequent friction and difficulties in communicating a clear common agenda.

In response to a question, Ms Merkel said European countries were looking into whether there was a way to limit the negative fallout from sovereign ratings downgrades in financial crises. “We must face [rating agencies'] judgment, they tell the truth,” Ms Merkel said. “But [ratings decisions] can have a reinforcing effect on a crisis.”

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China, the world’s second-biggest economy, has watched with increasing concern as eurozone economies have deteriorated, and has repeatedly urged European leaders to get a grip on the situation.

Merkel’s meeting with President Hu Jintao came a day after talks with Premier Wen Jiabao, who said Beijing was looking at ways it could contribute to Europe’s bailout funds and warned of an “urgent” need to solve the debt crisis.

“China is investigating and evaluating ways, through the International Monetary Fund, to be more deeply involved in solving the European debt problem via ESM/EFSF channels,” Wen said at a news conference with Merkel.

Wen was referring to the European Financial Stability Facility, a temporary rescue fund that was established to help struggling economies in Europe, and the European Stability Mechanism — a newer, permanent fund.

Hu told Merkel before their closed-door meeting Friday that her visit would “increase mutual understanding” between the two countries, whose bilateral trade reached $169 billion in 2011, an 18.9 percent increase from the previous year.

Merkel, who will return to Germany on Saturday, said in a speech Thursday she would raise the issue of human rights during her visit.

After meeting Hu she flew to the southern province of Guangdong, where German companies already have a significant presence, with Wen and executives from the energy, chemicals, engineering, banking and electronics sectors.

Her visit to the manufacturing hub will include a meeting with Gan Junqiu, the state-backed Catholic bishop of Guangzhou — the provincial capital — according to a German diplomatic source.

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Her trip comes just days after China was hit by deadly unrest in Tibetan-inhabited areas, and the leader of Europe’s biggest economy will also broach the issue of human rights with her Chinese counterparts.

Germany and China, the world’s top two exporters, enjoy vibrant trade relations and Merkel will meet investors and seek to boost confidence in Europe on her fifth trip to the world’s second largest economy.

She is due to make a key address on the euro crisis Thursday morning, before holding talks with Premier Wen Jiabao later in the afternoon.

Accompanied by a trade delegation, she will also hold talks with President Hu Jintao and visit the wealthy, southern province of Guangdong — a manufacturing hub — on Friday.

Observers will be watching her visit for any mention of last week’s violence in Tibetan-inhabited areas of Sichuan province, which saw police fire on protesters in unrest that left at least two ethnic Tibetans dead.

A German government source said human rights would figure highly on the trip’s agenda, with Merkel keen to talk about minority issues and social development in China.

The German leader will also discuss the eurozone with her Chinese counterparts, who are keen to see a return to growth in Europe and a stable euro.

She will hold talks on possible increased Chinese involvement in the International Monetary Fund, access to Chinese markets and intellectual property rights, the source said.

Merkel will also urge China not to take advantage of Europe’s ban on Iranian oil — imposed on Tehran over its nuclear programme — to boost its own imports of the resource, the source said.

And the German leader will ask for Beijing’s support for a UN Security Council resolution against Syria, where fighting between President Bashar al-Assad’s security forces and rebels is escalating.

On Friday, Merkel will fly to Guangdong — where nearly 500 German companies are already present — with Wen and executives from the energy, chemicals, engineering, banking and electronics sectors.

On the agenda of her discussions will also be rare earths — valuable elements that are used in the production of high-tech products and which are of “very great importance for the German economy,” the source said.

China has been accused of deliberately restricting their exports to drive up prices and force manufacturers onto its shores, but Beijing says it limits them for environmental reasons as mining them is very polluting.

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The latest indicators came a day after data showed the economyexpanded 9.2 percent last year, narrowing from 10.4 percent in 2010, as global turbulence and efforts to tame high inflation put the brakes on growth.

The world’s second-largest economy is widely forecast to slow even further this year despite efforts to maintain growth by easing credit,with the World Bank Tuesday forecasting growth of 8.4 percent in 2012.

Foreign direct investment in China fell for a second straight month in December, down 12.7 percent year-on-year to $12.2 billion, as the worldwide slowdown began to take hold, the Ministry of Commerce said.

In November, foreign direct investment registered its first year-on-year decline for a single month since July 2009.

Ministry spokesman Shen Danyang blamed the investment drop on weakness in the US and European economies, and warned the external environment could also hurt exports this year.

“Some major developed economies such as the United States andEurope are weak. Companies are being more cautious in their investment decisions and global multi-national investments have dropped,” he told a news conference.

Overall foreign investment in China held up well last year, rising 9.7 percent to a record $116.0 billion, as Asian countries boosted spending.

Nonetheless, growth was slower than in 2010, when blistering economic expansion and expectations for a stronger currency led to a 17.4 percent surge in the flow of foreign money.

Inward investment from US companies suffered the most in 2011, plunging 26.1 percent to $3.0 billion, while European investment registered a fall of 3.65 percent to $6.4 billion.

The strongest growth came from Asian countries, with investment from Hong Kong, Macau, Taiwan, Japan, the Philippines, Thailand, Malaysia, Singapore, Indonesia and South Korea combined rising 14.0 percent to $100.5 billion.

The latest figures came as the World Bank warned that economic turmoil in Europe was spreading to developing and other high-income countries that had hitherto been unaffected.

“Capital flows to developing countries have weakened sharply as investors withdrew substantial sums from developing-country markets in the second half of the year,” it said in a new report entitled Global Economic Prospects.

China’s trade surplus shrank in 2011 to $155.14 billion as export growth slowed sharply, reflecting the economic turmoil in Europe and the US, according to previously released figures.

“China’s exports will be difficult, the situation is very grim. We’re concerned about the growth rate of imports and exports,” Shen said.

In another worry for China’s economy, home prices in nearly three-quarters of its major cities fell in December from November and analysts say the property market correction could have larger implications.

“If this trend continues, with property transaction volume falling, we will have to see whether China’s economy can cope with it,” Liu Ligang, head of Greater China economic research for ANZ Group in Hong Kong, told AFP.

Some 52 of 70 Chinese cities tracked by the government, including Shanghai and Beijing, recorded month-on-month falls in new home prices, the National Bureau of Statistics said, with the total up slightly from 49 in November.

China has introduced a range of measures aimed at curbing property speculation over the past year, such as bans on buying second homes, hiking minimum down-payments and introducing property taxes in select cities.

Analysts worry a collapse in the property market could hurt the economy and say the government might have to roll back measures to offer debt-burdened local governments, which depend on land sales, some relief.

In December, China moved to ease credit by trimming bank reserves for the first time in three years, but the property industry is waiting to see if the government might relax measures aimed specifically at the sector.

“These draconian measures have been in place for more than a year, but if they go on for much longer it starts to get a bit dangerous for the broader economy,” said a Shanghai-based property analyst, who spoke on condition of anonymity.

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The wave of downgrades, including that of France’s triple-A status, underscored European leaders’ inability to come up with a solid plan to tackle their two-year-old debt crisis.

Beijing’s comments come as official figures Tuesday showed China’s economic growth slowed in the fourth quarter of 2011 to 8.9 percent as demand from key export markets in the United States and Europe fell.

As European leaders prepared to meet on January 30 to discuss a new fiscal pact, China’s foreign ministry said it would continue to support their efforts to fight the financial turmoil.

“Europe’s economic growth is closely related to the world economic recovery. We appreciate European countries’ important efforts to stabilise the market and promote economic growth,” said spokesman Liu Weimin.

“We believe the European countries will be able to overcome the current difficulties, and China is ready to work with the international community to continue to support the efforts of Europe in fighting the sovereign debt issue.”

Beijing has watched with increasing concern as the debt crisis has deepened in Europe, China’s top export market, and has repeatedly urged it to quickly get a grip on the situation.

European leaders have called on China, which has the world’s largest foreign exchange reserves, to invest in a bailout fund, but China has so far made no firm commitment to provide financial assistance.

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The diamond was reportedly snatched from ultra high-end jeweller Graff Diamonds in 2007 after two Bentley-driving robbers pretending to be shoppers raided the shop and got away with a haul worth $20 million.

Its origin was discovered when Hong Kong’s Yau On Pawn Shopsent it to a New York gem-grading laboratory for certification, according to the South China Morning Post, prompting a lawsuit from Graff seeking its return.

Danny Hung, a director at the pawnshop, told the paper that Yau On paid HK$3 million (US$386,000) for the diamond in November 2010.

He said it was bought from a private seller who he described only as a Chinese national and that the shop had documentation for the purchase.

“We’ve followed all necessary procedures,” he said, adding that the shop “will not give up” its legal battle for the ownership of the gem.

Hung could not be immediately reached for comment by AFP.

The diamond is now being held at the New York laboratory pending the lawsuit filed by Graff at a court in Manhattan.

Hong Kong police regularly update pawnshops on property reported stolen in the city, according to the Post, but Hung said the list does not include items stolen overseas.

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Police in southern China have detained a local official on suspicionof poisoning the stew at the restaurant where the two were eating in Guangdong province on Dec. 23.

Agriculture official Huang Guang, billionaire Long Liyuan and a third diner were sharing a cat meat hot pot — a local delicacy — when Huang allegedly dropped some toxic herbs into the stew, the BBC reported.

Long, who ran a forestry company, was taken to the hospital after feeling dizzy and sick and later suffered a cardiac arrest. Huang and the third diner were hospitalized as well, though both survived. According to the New York Times, Huang had apparently eaten some of the poisoned stew himself to avoid suspicion.

Police detained Huang on Dec. 30, after discovering evidence that Huang had embezzled money from Long.

Police initially took the restaurant’s owner into custody on suspicion of serving unsanitary food, according to the BBC. Long’s family, not believing he died simply of food poisoning, offered a $16,000 reward for information and insisted police keep the case open.

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