BRUSSELS/ATHENSBRUSSELS/ATHENS (Reuters) - Greece has blocked a European Union statement at the United Nations criticizing China's human rights record, a decision EU diplomats said undermined efforts to confront Beijing's crackdown on activists and dissidents.

The EU, which seeks to promote free speech and end capital punishment around the world, was due to make its statement last week at the U.N. Human Rights Council in Geneva, but failed to win the necessary agreement from all 28 EU states.

It marked the first time the EU had failed to make its statement at the U.N.'s top rights body, rights groups Amnesty International and Human Rights Watch said.

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A Greek foreign ministry official said Athens blocked the statement, calling it "unconstructive criticism of China" and said separate EU talks with China outside the U.N. were a better avenue for discussions.

"Greece's position is that unproductive and in many cases, selective criticism against specific countries does not facilitate the promotion of human rights in these states, nor the development of their relation with the EU," a Greek foreign ministry spokesperson said on Sunday.

Presented three times a year, the statement gives the EU a way to highlight abuses by states around the world on issues that other countries are unwilling to raise.

The impasse is the latest blow to the EU's credentials as a defender of human rights, three diplomats said, and raises questions about the economically powerful EU's "soft power" that relies on inspiring countries to follow its example by outlawing the death penalty and upholding press freedoms.

It also underscores the EU's awkward ties with China, its second-largest trade partner, diplomats said.

Brussels has welcomed Beijing as an ally against U.S. President Donald Trump in the fight against climate change and trade protectionism. But as business ties grow, the bloc is struggling to speak out against a Chinese government crackdown on human rights lawyers and other activists since 2015.

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China's COSCO Shipping, owner of the world's fourth-largest container fleet, took a 51 percent stake in Greece's largest port last year.

Hungary, another large recipient of Chinese investment, has repeatedly blocked EU statements criticizing China's rights record under communist President Xi Jinping, diplomats said.

The Greek foreign ministry spokesperson said "there were also other countries that expressed similar reservations".

One EU diplomat expressed frustration that Greece's decision to block the statement came at the same time the International Monetary Fund and EU governments agreed to release funds under Greece's emergency financial bailout last week in Luxembourg.

"It was dishonorable, to say the least," the diplomat said.

When asked about Greece's actions at a regular briefing in Beijing, Chinese foreign ministry spokesman Geng Shuang said: "We express appreciation to the relevant EU country for upholding the correct position."

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"We oppose the politicization of human rights and the use of human rights issues to interfere in other countries' domestic affairs," Geng said