SHANGHAI - The European Union has no intention to decouple from China but needs to protect itself when its openness is abused, the bloc's Executive Vice President Valdis Dombrovskis said, as both sides look to cool rising tensions over geopolitics and trade.

Relations have become tense due to Beijing's ties with Moscow after Russian forces swept into Ukraine, and the EU's push to rely less on the world's second-largest economy.

The bloc posted record bilateral trade with China last year, but it is "very unbalanced", Dombrovskis said on Saturday in a speech at the annual Bund Summit conference in Shanghai, citing a trade deficit of almost 400 billion euros ($426.08 billion).

Dombrovskis, who is also the bloc's trade commissioner, is on a four-day visit to China seeking more balanced economic ties with the EU.

He arrived just over a week after the European Commission said it would investigate whether to impose punitive tariffs to protect European producers from cheaper Chinese electric vehicle imports it says are benefiting from state subsidies.

The trip is designed to renew dialogue with China after the COVID-19 pandemic with both sides looking to cool tensions over issues ranging from foreign investment, trade and geopolitics as well as Western criticism of Beijing's closer ties with Moscow following Russia's 2022 invasion of Ukraine.

"Creating an open market among its members was one of the EU's founding principles. We are also committed to free and fair global trade. And ‘fair’ is the key word here," he said.

Citing the bloc's trade deficit as an example, he added "the EU also needs to protect itself in situations when its openness is abused."

"This means minimising our strategic dependencies for a select number of strategic products," but the EU's economic strategy was focused on de-risking, not decoupling, he said.

"The EU has no intention of decoupling from China."

LITMUS TEST

The EU blames its 400 billion euro trade deficit partly on Chinese restrictions on European companies.

A "thousand" barriers to market access have propelled the trade deficit to its "highest in the history of mankind", EU Ambassador to China Jorge Toledo lamented at a forum in Beijing on Thursday.

The economic and trade dialogue on Monday between Dombrovskis and Chinese Vice Premier He Lifeng, the 10th such discussion since 2008, will be a "litmus test" for the two sides, Chinese nationalist tabloid Global Times said on Thursday.

Dombrovskis told Reuters on the sidelines of the summit that "substantial technical work" preceded the EU probe into Chinese-made EVs and that they would look to engage both Chinese authorities and industry in the investigation.

"We are open for competition including for competition in the electric vehicles sector but competition has to be fair," he said. China has blasted the probe as protectionist and the Chinese Chamber of Commerce to the EU said the sector's advantage was not due to subsidies.

Asked if the EU was looking at other sectors, he added: "there are several areas where we are looking at possible trade irritants and barriers, and actually this is one of the topics I'm going to raise also with my Chinese counterparts... On one hand we must discuss how we advance our relationship, but also we need to be able to discuss if there are some issues or trade barriers to be addressed."

He declined to provide further details.

In his speech, Dombrovskis also said he believed that China faced a "challenging process of macroeconomic adjustment", but stressed that Beijing must broaden access for foreign businesses and maintain a stable business environment for fair trade relations.

He also urged China to take a stance against Russia's "tactic of weaponising food" and use its influence in reviving the Black Sea Grain Initiative which expired in July after Moscow quit.

($1 = 0.9388 euros) (Reporting by Brenda Goh; Additonal reporting by Albee Zhang; Editing by Shri Navaratnam and William Mallard)