LONDON, Jul 21, 2010 (IPS) - German Chancellor Angel Merkel's weekend visit to China has put a positive spin on the increasingly complex economic relations between China and the European Union, but the flurry of deals signed has not disguised the fact that Beijing faces challenges over its EU policies both at home and abroad.

Beijing's stated commitment to continue investing in euro-denominated assets is being challenged by a vocal lobby of domestic critics who clamour China's piles of foreign exchange reserves should be put to better use. And the government's ambitions to nurture national champion companies coupled with restrictions placed on foreign businesses in China are now receiving daily attacks from Western politicians and executives.

Displeasure over China's post-crisis policies towards foreign businesses was voiced long before Merkel arrived in Beijing. First it was U.S. President Obama who took up the issue by calling for a level-playing field for U.S. business operating in China. Last week British Foreign Secretary William Hague pressed the matter when meeting with his Chinese counterpart, Yang Jiechi.

Hague said businesses in the European Union were increasingly worried over the way Chinese officials were enforcing regulations and the way indigenous innovation rules were impeding market entry for foreign companies.