China has condemned the EU’s anti-subsidy investigation into Chinese electric vehicles (EVs), labelling it a “naked protectionist act” which would disrupt the global automotive industry and harm China-EU economic relations.

European Commission president Ursula von der Leyen announced the investigation during her annual address to EU lawmakers on Wednesday.

The threat of a probe into China’s subsidies could slow the pace of the country’s EV exports, benefiting European manufacturers. However, following through on the investigation could escalate tensions with China.

It “is a naked protectionist act that will seriously disrupt and distort the global automotive industry and supply chain, including the EU, and will have a negative impact on China-EU economic and trade relations,” China’s commerce minstry said.

“China has always upheld an open and cooperative attitude and welcomes EU automobile companies to further expand investment in China, including investment in electric vehicles.”

Beijing could take retaliatory measures if the EU imposes tariffs on subsidised Chinese EVs, potentially escalating trade tensions. Germany, in particular, is cautious about such repercussions due to the significance of China to its automotive sector.

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By GlobalData