China is standing firm against the European Commission’s formal warning that it is ready to levy trade duties against two Chinese telecom equipment makers, Huawei Technologies and ZTE Corp (SHE:000063). “We hope the European Commission will not make a move that will not be good for anyone,” a spokesperson for the Ministry of Commerce of China warned the European Commission on Wednesday, according to China News.

China’s reaction follows news that EU trade chief Karel De Gucht is set to win support from the bloc’s executive arm on Wednesday to send the warning letter and show China that Brussels is serious about countering what it says is state aid, Yahoo News reported. The EU decision marks an intensification of efforts to guard against what Brussels says is dumping by China, the EU’s second-largest trading partner. Subsidies that large Chinese corporations receive from the state enable them to become unfair competitors in the European market, with relatively low prices, according to China News.

RTR3C86R Attendees at a Huawei show look over a Huawei smart phone. Photo: REUTERS/Steve Marcus

Huawei, the largest telecoms equipment manufacturer in the world, and ZTE, the fifth-biggest telecom equipment maker, both denied on Tuesday receiving any illegal state subsidies. Huawei spokeswoman Tina Tsai said it has repeatedly asked to meet with the European Commission to discuss such allegations, but was turned down, China News reported.  

Huawei has faced obstacles in its overseas expansion. The United States government repeatedly warned American companies not to utilize Huawei equipment, as the company is suspected to be tied to the Chinese government. Huawei denied connection with any security breaches the United States government may have suffered.

The Chinese government is standing behind Huawei and ZTE. On Wednesday, Shen Danyang, a spokesman for the Ministry of Commerce of China, addressed the EU’s move in a regularly scheduled press conference, according to China News.

“China has always advocated solving trade friction with negotiations. Regarding issues arising from the expansion of Chinese telecom makers, from the latter half of 2012, China and the EU have maintained close communication, and have carried out several rounds of negotiations,” Shen said. “The channel of communication has always been open and unimpeded. An executive delegation from the EU visited China recently and discussed the issue with China. The EU indicated it will consider and respond to the solution suggested by China.”

“Now, the European Commission has made a decision without any responses to China,” Shen added. “This move casts doubt on the EU’s sincerity in solving conflicts with negotiation.”

Collaborations in the telecom field between the EU and China have always been mutually beneficial, and the Chinese market has remained open. In fact, EU companies have a higher share of China’s telecom market than Chinese companies’ share in the EU market.

Any unilateral moves on the EU’s part, Shen stressed, will damage the interests of both sides. This is the reason many EU member states do not endorse the move.

“In conclusion, we hope the European Commission will not make a move that will not be good for anyone,” Shen said. “If the EU insists on the investigation, China will take adamant moves to preserve its legal rights, according to WTO regulations and Chinese laws. Any resulting consequence will necessarily be assumed by the instigating party,” China News reported.