Anti-dumping investigation

There were no threats of a trade war, no announcement of revenge. Instead, Beijing simply expressed "deep regret" on Thursday when the European Union announced it was launching an investigation into whether Chinese solar panel producers are illegally undercutting prices on the European market.

The European Commission's announcement came after months of pressure from EU Pro Sun, which represents over 20 European firms.

The investigation is due to last 15 months; however anti-dumping duties could be imposed within nine months based on provisional findings.

It is the EU's largest ever dumping case in terms of import value.

Warnings that both sides could suffer

In 2011, China exported solar panels and components worth 21 billion euros (26 billion US dollars) to the EU at prices which the EU Pro Sun says have brought European companies to their knees.

There were no threats but there were warnings that nobody in the solar industry would benefit from the investigation.

A spokesperson for China's trade ministry said that restricting Chinese photovoltaic battery products would harm both sides and "damage the healthy development of the global photovoltaic industry and clean energy."

"The European Commission went ahead to initiate the anti-dumping investigation despite repeated calls by China to solve the trade dispute on photovoltaic products via consultations and cooperation," the ministry said in a statement.

Rejections of dumping charges

China's biggest solar companies also voiced their concerns and rejected allegations of dumping.

A spokesman for Yingli Green said that the European companies which had complained were a minority: "They have their own problems and want to blame their Chinese competitors. Protectionism is growing in Europe because of the current economic situation."

He added that it would be disastrous if punitive tariffs were imposed - not only for Chinese companies but also for European firms, especially German ones, since they supplied raw materials and machines to China's industry.

For this reason, many European solar firms are against the anti-dumping investigation since they are worried about a trade war.

Subsidies from the state

On Thursday, the European Union Chamber of Commerce in Beijing in an annual paper said that the state-led investment model in China was no longer sustainable. It said foreign and private Chinese enterprises should receive the same treatment as state companies.

Secretary General Dirk Moens said he was in favor of "dialogue to avoid escalation."

"The World Trade Organization has issued clear rules about state subsidies and they are only allowed in a restricted context," he said and pointed out that if talks were not enough then certain "instruments" would have to be employed to ensure companies did not receive unfair treatment. For example, an investigation and perhaps punitive tariffs.

Although it is an open secret that Chinese companies receive beneficial treatment from the state, they have not been exempt from the crisis that has hit the solar technology sector.

LDK Solar - one of the biggest makers of silicon wafers in the world - is now 3.3 billion euros in debt. However, according to reports in the business media, the state is going to help it stay afloat for as long as possible. Jiangxi province has agreed to give the company 250 million euros in subsidies, and the city of Xinyu, where LDK is headquartered, will pay off 60 million euros of its loans.