By Chris Buckley
BEIJING, Dec 1 (Reuters) - The public cheeriness that usually accompanies summits between China and the European Union is on ice this year after Beijing called off the annual meeting, exposing rifts that go well beyond their tiff over Tibet.
China last week pulled out of the summit scheduled for Lyons on Monday, blaming French President Nicolas Sarkozy's decision to meet the Dalai Lama, the exiled Tibetan Buddhist leader reviled by Beijing for demanding self-determination for his homeland.
Sarkozy's planned meeting on Dec. 6 has enraged China's leaders, who are raising pressure to deter the Dalai Lama's frequent unofficial meetings with Western leaders.
But experts said that even after this quarrel blows over, China's willingness to cancel highlights deeper failings that may distract from efforts to resuscitate the international financial system and stalled global trade talks.
"This decision effectively was made because China doesn't place much value in Europe any more," said John Fox, a former British diplomat in Beijing who now works at the European Council on Foreign Relations in London.
"It shows that still at this time of grave financial crisis, China is more willing to have a tantrum over Tibet rather than talk to its biggest trade partner, and that must be a worry."
Both sides can be baffled by the other's murky ways. The EU round-robin of multiple bodies overseeing 27 sometimes sparring national governments makes for messy negotiations. China has increasingly turned to rival national governments to press its demands, which can be both unyielding and vague.
Overcoming these malfunctions requires policy surgery on both sides, said Fox, whose think tank is preparing a critical report on EU-China relations to appear early next year.
"This again shows that Europe having dialogues ad infinitum with China doesn't substitute for clearer policy on China, which is clearly lacking," he said.
"THEIR MOST VIBRANT AND FRUITFUL PERIOD"
China's policy-making can also cause head-scratching. Not a week before China called off the summit, Vice President Xi Jinping said ties with Europe were better than ever.
"China-EU relations have entered their most vibrant and fruitful period," Xi told a visiting Slovakian politician on Nov. 21, according to the official Xinhua news agency.
Such rosy talk has been customary for China-EU dealings, and several years ago Beijing indeed hoped a growing and increasingly united Europe could be a sympathetic counterweight to Washington.
But in recent years, discord within Europe, the election of less pro-China leaders in Paris and Berlin, and trade and diplomatic friction with Beijing have dampened those hopes.
China's ballooning trade surplus has fanned anti-dumping disputes over its goods, including shoes, garments and most recently screws and steel fasteners.
For its part, Beijing was dismayed when in 2005, Brussels backed away from lifting an arms sales embargo imposed on China after its military crackdown on pro-democracy protesters in 1989.
Emboldened by the successful Beijing Olympics and the financial crisis battering the West, President Hu Jintao is now less willing to swallow his irritation with Europe, said Shi Yinhong, a professor at Renmin University in Beijing.
"China believes that Europe values its own values too much," said Shi. "But China is becoming more self-confident and Hu Jintao is increasingly inclined to do things his own way."
Shi said the discord was unlikely to directly hurt broader talks over the financial crisis, but Beijing's ire could make it less willing to offer prompt concessions or champion EU views.
Even if the Lyons summit had gone ahead, it was not going to achieve much, said Andrew Small, a researcher for the German Marshall Fund think tank in Brussels, who recently visited Beijing for talks with officials and scholars.
"The summit was heading for a big failure even before this happened," Small wrote in emailed comments. Neither side was offering the concessions on trade, security contacts and other issues that the other wants, he wrote.
Small summed up Beijing's attitude as, "We don't know where the European project is headed, Europe needs us more on the economic crisis than vice versa, the political atmospherics have become bad, so why should we make any concessions?"
After Sarkozy gives up the six-month rotating EU presidency in a few weeks, it goes to Czech President Vaclav Klaus, a combative critic of Communism who stayed away from the Beijing Games.
"Both sides will eventually find a way to step down over the Dalai Lama," said Shi. "But the relationship is still a mess." ((Editing by Dean Yates; chris.buckley@reuters.com; +86-10-66271261))