The European Union says it is willing to work towards lifting the arms embargo on China.

Netherlands Prime Minister Balkenende, who holds the EU rotating presidency, confirmed that work to strengthen the application of the EU Code of Conduct on arms exports was continuing.

Premier Wen Jiabao, who attended the EU-China summit in The Hague says China welcomes this positive signal, adding it is beneficial to the sound development of the comprehensive strategic partnership between the two sides and will not harm the interests of any other third party.

Turning to China's request to the EU to be granted full market economy status, the EU Trade Commissioner Peter Mandelson says the EU is willing to address China's concern on this issue.

An official with the Chinese Foreign Ministry revealed a joint working group has recently held its first meeting to discuss progress in solving this issue.

On the Chinese currency rate issue, Wen Jiabao said China will gradually move towards a more-flexible exchange rate of the RMB, stressing the reform will take into consideration the impact on neighbouring countries and the global economy.

China and the EU also signed a joint declaration on non-proliferation and arms control. Besides the declaration, the two sides inked another seven agreements on enhancing co-operation in various fields, including customs, peaceful use of nuclear energy, financing, science and technology, social security reform and personnel exchanges.