Chinese officials have expressed anger at an offer by the European trade commissioner to drop an investigation into illegal subsidies in exchange for European telecoms vendors getting a larger share of the Chinese market, the Financial Times (FT) reports.
The European Commission has been threatening to investigate Chinese telecoms vendors Huawei and ZTE about state subsidies – including export credits – that they are alleged to have received, allowing them to offer lower prices and undercut European rivals.
European trade commissioner Karel De Gucht requested that European suppliers be given a 30 percent share of China’s telecoms market and that Huawei and ZTE raise the price of their exported goods by 29 percent. If these requests are granted the subsidy investigation would reportedly be dropped.
The FT understands that Chinese diplomats have privately complained about the EU’s demands to at least one EU capital, saying they are unreasonable — and possibly illegal.
A senior EU official said De Gucht had outlined his views to the Chinese in December but suggested Beijing had mistaken or misrepresented what was said. Chinese officials are due to meet De Gucht in Brussels later this week.
A spokesman for the Chinese mission to Brussels told the FT that his country hopes to reach “an agreement settling this issue without going to a trade war” through “consultation and negotiation”.
Unusually, the European Commission proposed an investigation into the alleged subsidies without a formal complaint from an affected company. De Gucht said the case is necessary as European companies won’t lodge complaints as they are concerned about retaliation from China.
A formal investigation by Europe could result in tariffs against the Chinese companies.
The European Commission told member states in December that it had “solid evidence” that China had given illegal subsidies to the companies, despite denials from Huawei and ZTE.