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European Commission at loggerheads with China over investigation demands

Relations between China and the European Commission have hit a new stumbling block, with officials in the Asian nation reacting negatively to an offer made by the European trade commissioner aimed at safeguarding European interests.

An ongoing EC investigation into illegal subsidies reportedly received by Chinese vendors ZTE and Huawei could be scrapped if the country is willing to make certain concessions for European vendors – Huawei and ZTE would be required to raise their export prices by 29% and cede 30% of the Chinese market to European suppliers. The offer has been posited by European trade commissioner Karel De Gucht.

Reportedly, Chinese diplomats have claimed that the EC’s terms are unfair and potentially illegal, and made this known to at least one EU member capital. The EC investigation is based on the allegation that Chinese vendors received illegal government subsidies that allowed them to charge far lower prices than their European rivals. This has been denied by both Huawei and ZTE.

The EC investigation is unusual in that it was not prompted by an official complaint by a company. According to De Gucht, firms affected by the subsidies have avoided speaking out as they are wary of China’s reaction, and this has necessitated the investigation. The EC has stated that it has “solid evidence” of illegal subsidies – if the investigation found this to be true, the Chinese firms would face heavy financial penalties.

A spokesman for China said that the country wished to use “consultation and negotiation” to conclude “an agreement settling this issue without going to a trade war”.

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