Huawei denied reports that it has received subsidies from the Chinese government which enabled it to undercut rivals in foreign markets, while Ericsson has reportedly opposed potential punitive measures from the European Union.

This follows reports earlier this week, which said that the European authorities were considering taking action on the issue.

“We deny any claim that Huawei employs dumping practices and has benefited from illegal state subsidies. Huawei also objects to the investigation that the European Commission is reportedly launching on the basis of these claims,” the infrastructure number two said in an emailed statement.

The company also said it had not received any communication from the European Commission regarding an investigation. 

The statement added that Huawei “applauds” the European Commission’s position on fair and open competition and believes the globalisation of the telecommunications industry “requires an open environment”.

The Financial Times reported that the European Union has evidence showing that Huawei and ZTE were receiving subsidies to allow them to undercut rivals in international markets. Following a closed door meeting last week, the newspaper said a formal case could begin shortly, potentially leading to the Chinese companies being subject to “punitive tariffs”.

The Financial Times suggested the case has “unnerved” European vendors such as Nokia Siemens Networks, Ericsson, and Alcatel-Lucent as they all have significant business in China, and could suffer if Chinese authorities take exception to any EU action.

Ericsson told Dow Jones Newswires it is opposed to the European probe, with the company’s head of government and industry relations, Ulf Pehrsson, saying punitive measures would be the wrong way to deal with the matter. "Ericsson is a strong supporter of free trade and we don't believe in this type of unilateral measure," Pehrsson said, adding that the EU would risk initiating "a negative spiral" by targeting individual Chinese firms.

Despite the rise of the Chinese vendors increasing competition in recent years, NSN told Mobile Europe that it has a strong presence in China, including R&D and manufacturing operations, and that “we do not believe it would be appropriate for us to take a position in this case”.

When asked whether NSN viewed the EU’s investigation as a potential threat to exports to China, the company said it would not be “appropriate to speculate about any potential consequences at this stage”. The company added that the European Commission had informed it that it was investigating the issue.