CHINA could find itself at odds with the entire European Community if the political battle with Britain drags on, a senior Italian trade official warns. Mr Marcello Inghilesi, president of Italian Institute for Foreign Trade, said his hopes for increased two-way trade could be frustrated by the Sino-UK wrangle over democracy. He said: ''We are in the European Community and if one country of the EC has an exterior problem, then we have that problem. ''I don't know the solution, or final outcome of this row, but it's for sure that the UK's problems are our problems. Until now, there have been no consequences. ''While I don't know the opinion of the [Italian] Minister of Foreign Affairs, what I can say is if the problem becomes serious I believe the EC will have a common point of view.'' The single European Community market, which came into effect on January 1, was heralded as a massive 340-million strong no-barriers market, offering trade opportunities for both the Asia-Pacific region and the rest of the world. But Mr Inghilesi, citing the example of Tiananmen Square, said politically unsettling events threatened healthy trade relations. He said: ''There are many people interested in China, but it depends upon political problems. The accident of Tiananmen Square is still in the memory of the Italian people, and that was an obstacle to increasing our trade. ''So long as there is not in the future another Tiananmen Square or another political accident, I think that the trade and economic operators are very much in a mode to increase two-way relations.'' Political clouds aside, Mr Inghilesi said China was a vital market for Italy while Italian goods were increasingly attractive to foreigners because of the devaluation of the lira. ''For us China is very very important, maybe among the top regions in the world in future years. ''And we are taking a two-pronged approach - investment, that is, joint-venture companies in areas like Pudong and Guangdong; and trade.'' Italian companies would look to China for leather, silk, wool and coal, while selling goods such as clothes, shoes, machinery and light industry to the mainland, he said. Hongkong would continue to serve as a key service base, providing airport, port and finance facilities, he said, noting that more than 300 Italian companies already had offices in the territory. In a luncheon speech to Italian and Hongkong businessmen, Mr Inghilesi said: ''The Italian companies treasure Hongkong's sophisticated communication and transport networks, management system and financial structure. ''Moreover, Hongkong businessmen, with their perfect understanding of European and Chinese cultures, and their trade expertise, are the necessary middlemen for Italians seeking to work out a deal with China. ''To Italy, Hongkong is not only a market, but a trade partner as well as a gateway to China. The territory is playing an indispensable role in Italy's grasping a strong foothold in the Chinese market.'' Trade between Italy and Hongkong rose 27 per cent to US$1.53 billion in the first 10 months of last year. Almost a third was re-exported to the mainland. Hongkong's exports to Italy climbed 27 per cent to $1.39 billion over the same period. The Italian Institute for Foreign Trade is a government body linked to the Italian Ministry for Foreign Trade, with a worldwide network and a total staff of more than 2,200. Mr Inghilesi said there were four offices on the mainland. Each office has a two-pronged programme geared towards promotion of Italian trade and assistance to companies wishing to operate there. ''For us the goal is to increase trade and to improve the image of Italy,'' he said.