The European Commission agreed to impose punitive import duties on solar panels from China in a move to guard against what it sees as dumping of cheap goods in Europe, prompting a cautious response from Beijing which called for further dialogue.
EU commissioners backed EU Trade Chief Karel De Gucht's proposal to levy the provisional duties by June 6 and make Chinese solar exports less attractive, two officials said.
Shares in German manufacturers SolarWorld, Phoenix Solar and Centrotherm rose as much as 7% on the decision, while Frankfurt-listed shares in China's Suntech were down more than 4%.
The investigation into accusations of dumping is the biggest the commission has launched, but Brussels is trying to tread a careful path, knowing it needs China, the EU's second largest trading partner, to help the bloc pull out from recession.
China's ambassador to the WTO, Yi Xiaozhun, called the decision a mistake although he declined to comment on any possible retaliation, adding the decision "will send the wrong message to the world that protectionism is coming."
China's Commerce Ministry on Thursday called for dialogue. "We don't want to see a trade war between the two sides and we hope the EU can cautiously make the ruling decision on China's solar panel products," spokesman Yao Jian told reporters.
Given that Germany and France are seeking to increase exports to China, De Gucht will try for a negotiated solution with new Chinese Commerce Minister Gao Hucheng before an EU deadline in December to cement the levies for up to five years.
That could mean agreeing a minimum price at which all photovoltaic (PV)panel makers selling in Europe adhere to, diplomats said.
The EU duties, which will come into effect once the commission publishes the decision in its Official Journal, will be set at an average of 47%.
Trade specialists from all 27 EU countries will be consulted on May 15 at a meeting in Brussels and are expected to back the decision, although their position is non-binding.
Chinese solar panel production quadrupled between 2009 and 2011 to more than the entire global demand. EU producers say Chinese companies have captured more than 80% of the European market from almost zero a few years ago, exporting 21 bln euros ($27 bln) to the European Union in 2011.
As a result, Chinese-made panels are as much as 45% cheaper than those made in Europe.
Europe accounted for half of the global market in 2012, which was worth $77 bln, according to research firm IHS.
The commission started its investigation in September, taking up a complaint by a group of mainly German and Italian companies led by SolarWorld, which was once Germany's biggest solar group but now has 900 mln euros in liabilities. Its smaller rival Q-Cells filed for insolvency last year.
The United States levied its own duties on Chinese solar energy products in 2012, arguing that China's rapid expansion into the industry had created a massive oversupply.
Germany was the world's biggest market last year, followed by China, Italy and the United States, according to the European Photovoltaic Industry Association. Germany installed more solar panels than any other country in 2012, at 7.6 gigawatts of newly connected systems, while China was second with 5 gigawatts.
Solar covers about 3% of Europe's electricity demands but government support for developing the green energy source varies widely across Europe with the euro zone debt crisis dampening government support in Spain, Greece and Cyprus.
