China tells EU to end arms ban

"I have to be frank with you in saying this - on the issue of lifting the arms embargo on China and recognising China's full market economy status. We have been working hard for 10 years [on this] but the solution has been elusive. I deeply regret this. I hope and I do believe that the EU side will seize the opportunity and take the right initiative at an early stage to resolve these issue," he said.

The official TV feed did not broadcast Van Rompuy or Barroso's reaction and there is no independent press access to the event.

Earlier in his opener, Wen noted that EU institutions are gaining more power over EU countries.

"As the European integration process deepens, we hope ... that EU institutions will encourage EU member states to play a more pro-active part in EU-China co-operation," he said.

He added the EU should not be scared of China: "We don't have major conflicts of interest. We regard each other as an opportunity not a threat."

He did not mention the US directly. But he said that China is "opposed to the G2" - a balance of world power dominated by the US and China.

The EU imposed the arms ban on human rights grounds after the 1989 Tiananmen Square massacre.

Amid talk of a merger between EU arms firms BAE Systems and Eads to create the world's largest weapons maker, the EU embargo also has strategic implications on arms technology transfer.

EU officials have in the past voiced sympathy for dropping the ban.

"The current arms embargo is a major impediment for developing stronger EU-China co-operation on foreign policy and security matters. The EU should assess its practical implication and design a way forward," EU foreign policy chief Catherine Ashton said in an internal EU paper back in 2010.

The ban is already being flouted in practice.

EU countries granted export licences for almost €218 million of defence equipment to China in 2010.

According to EU documents, the lion's share came from France and the UK for aircraft and ground vehicle parts, electronic equipment, missiles and over €13 million of: "Chemical or biological toxic agents, 'riot control agents,' radioactive materials."

The US and Japan both oppose the move, however.

Japan's then EU ambassador Norio Maruyama told EUobserver last May that: "We have had a lot of bad experiences with the build up of China's military and the opacity of its military budget ... An end to the arms embargo would be a mistake, it would destabilise the situation in the region."

He added: "The US understands the danger, as they will be the first in line if something happens in Taiwan."

A leaked US cable from 2004 noted that Austria, Belgium, the Czech republic, France, Greece, Italy and the UK are in favour of relaxing sanctions.

Rockwell Schnabel, the US ambassador to the EU at the time, said: "Our efforts have managed to slow down the momentum in favor of removing the arms embargo, but have not killed this idea outright."

Meanwhile, Wen's comment on market economy status cuts to another painful issue in China-EU relations: the alleged dumping of cheap exports on EU markets.

If the EU takes the step, it will become harder for EU countries to impose tarrifs on Chinese goods.

The European Commission currently compares Chinese export prices with those of other low-cost exporters to see if they constitute illegal "dumping" under World Trade Organisation rules. If China is designated as a market economy, the EU will have to compare Chinese export prices with Chinese domestic prices instead, meaning fewer products will make the dumping grade.