The European Union's top trade official has raised the rhetoric in a brewing telecoms trade row with China, citing Huawei and ZTE for violating anti-dumping and anti-subsidy guidelines, but stopped short of a formal investigation.
Trade Commissioner Karel De Gucht, speaking in an interview in New York, said the core of his concern was access to cheap capital that "creates a distorted playing field".
Cheap finance from China's state-backed banks is increasingly regarded by the EU and the United States as an unfair subsidy that breaks global trade law.
De Gucht said he was prepared to launch a formal investigation into anti-competitive behaviour by the Chinese firms in order to protect a strategic sector of Europe's economy.
Huawei and ZTE, respectively the world's No 2 and No 5 makers of telecom equipment, have previously denied benefiting from illegal state support.
Huawei spokesman Scott Sykes yesterday told the Sunday Morning Post that the company was disappointed that the European Commission had "taken the unprecedented step of deciding in principle to open the first ever ex officio dumping and subsidy investigations".
"In Europe and in all markets, Huawei always plays fair and we win business and trust from our customers through our innovative technology and quality service, rather than via pricing or subsidies," he said.
De Gucht's office on Wednesday said an investigation was prepared but put on hold. At the time no companies were officially named. The pause is to allow further negotiations with China.
China responded on Thursday, threatening the EU with retaliation.
China exports network equipment, base stations and connections used by telecom providers to transmit voice and data messages worth more than €1 billion (HK$10 billion) a year to the EU, giving it almost a quarter of the market.
De Gucht declined to say whether he would go ahead with imposing punitive import duties on €21 billion worth of imported Chinese solar panels. The European Commission agreed to his proposal for a 47 per cent tariff, which he can formally declare on June 6 if it is published in the EU's official journal.
Of 31 trade investigations under way in Europe, 18 involve China.