The European Commission (EC) has bolstered its case for an investigation into whether Chinese vendors Huawei and ZTE are receiving government subsidies to undercut rivals in the European market, reports the Wall Street Journal.
Analysis by the EC determined that Huawei and ZTE are selling wireless network equipment for at least 35 percent below what it deems fair market prices.
The EC document seen by the Wall Street Journal attributes the low prices to direct support from the Chinese government to the two companies, which serves to “destabilise the market instantly and create an unfair competitive advantage over the otherwise very competitive EU industry”.
The analysis, which was distributed to national governments earlier this year, suggests the unfair practices could force European companies out of business is left unchecked.
European officials are now deciding whether to launch an investigation, with sources saying it is waiting for a proposal promised by the Chinese authorities to address the European concerns.
The EC announced it was considering an investigation into the companies earlier this year but delayed action as no formal complaint had been received from a stakeholder.
It was suggested that the possibility of an investigation “unnerved” executives from European vendors Ericsson, Nokia Siemens Networks and Alcatel-Lucent, all of which have significant businesses in China which could suffer if the Chinese authorities retaliate with high tariffs in the wake of an investigation.
If the trade investigation goes ahead, it will be the first launched by the Commission without first receiving a complaint from the European industry.
The European report also calls for the US government to investigate the unfair trade practices – including state support – of the Chinese telecommunications sector.
The Intelligence Committee of the US House of Representative recently published a report saying that links between Huawei and ZTE and the Chinese government represent a security risk and recommending that US companies avoid doing business with the vendors.