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EC investigation forges ahead against resilient China

The European Commission has declared its intention to investigate imports of network equipment from China, while clarifying that any investigation will not go ahead immediately to “allow for negotiations towards an amicable solution with the Chinese authorities”.

Trade Commissioner Karel De Gucht has taken a strong stance against China, pressing for an investigation into vendors Huawei and ZTE following allegations that the country’s government was providing them with illegal subsidies which allowed them to undercut their European rivals.

China has responded that it will “take firm measures to safeguard its legitimate rights and interests” if the investigation is opened. Tensions have run high over the EC’s highly unusual “ex officio” action, was deemed by the EC to be “particularly important as it offers a ‘shield’ when the risk of retaliation against European companies asking for trade defence instruments is high”.

The ex officio move is necessary as no major European vendors - including Alcatel-Lucent, Ericsson and NSN have lodged an official complaint against the alleged Chinese subsidies. Falling out of favour in China would be ill-advised for them due to their existing business interests in this lucrative market; they are therefore unlikely to offer formal support to the EC probe.

An unnamed Chinese diplomat reportedly told Reuters that “the EU in the end does not want to make a big fuss about this”, suggesting that the case could be resolved quickly and via negotiation.

A spokesman for China’s Ministry of Commerce, Shen Danyang, reportedly warned that while communications between China and Europe were currently “smooth and open”, the country would be spurred to defensive action if the EC opened an investigation. He added that “the consequences [of an investigation] must be borne by the party provoking the friction”.

De Gucht has stirred anger in China previously by demanding that Chinese vendors increase their prices by 29%, as well as calling for 30% of the Chinese market to be set aside for European vendors.

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