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Sept. 14 (UPI) -- China issued a stinging rebuke to the European Union Thursday in response to an investigation launched this week into alleged lucrative subsidies paid to Chinese electric vehicle makers throughout Europe, calling the move a "blatantly protectionist act." China's Commerce Ministry issued a statement blasting the probe, which reportedly caught Beijing's leadership by surprise when it was announced Wednesday by European Commission President Ursula von der Leyen.
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"Europe is open to competition but not for a race to the bottom," von der Leyen told lawmakers Wednesday during her annual State of the Union address at the European Parliament.
The probe will look into whether subsidies were paid to Europe's electric vehicle industry to saturate the market with "cheaper" Chinese EVs.
"We have to be clear-eyed about the risks we face," von der Leyen said of the EV sector.
She added that "global markets are now flooded with cheaper Chinese electric cars and their prices are kept artificially low by huge state subsidies."
The investigation is expected to last no more than 13 months, and will likely impose long-term economic measures that would lessen China's footprint throughout the EU.
After the probe, the EU will likely impose trade restrictions on China such as tariffs, quotas, curbs on imports, or currency controls, which would raise the risk of further economic reprisals from Beijing.
The announcement sparked an immediate backlash in China, which had been boosting its exports in an effort to corner the market on solar power and other green industries across Europe.
The Communist government warned the investigation would severely fracture world trade and vowed to take steps to protect its global financial interests.
"China believes the investigations announced by the European Union in the name of 'fair competition' are actually aimed at protecting its own industries," the ministry said. "It's a blatantly protectionist act that will seriously disrupt and distort the global -- inclusive of the EU -- automotive industry and supply chain and will have a negative impact on China-EU economic and trade relations."
The rift comes about four months after the United States and Europe signed agreements to decrease their collective dependency on Beijing rather than sever ties altogether with the world's second-biggest economy.
The Biden administration was also stepping up efforts to uproot Chinese infrastructure around the world amid increasing fears of espionage.
Meanwhile, Beijing was facing increased economic pressure as the country's exports declined for the fourth straight month in August, down by 8.8% compared to a year ago.
Some in China's auto industry claimed that Chinese EVs were being sold in Europe at nearly double the cost as in mainland China.
"China's new energy vehicles exports are seeing stronger volumes not due to huge state subsidies, but because of the highly competitive China industrial supply chain from strong market competition domestically," said Cui Dongshu, the secretary-general of the China Passenger Car Association.
"The EU should view the development of China's electric vehicle industry objectively, rather than arbitrarily employing unilateral economic and trade tools to restrict the development or increase operating costs of China's electric vehicle products in Europe."
In a Wednesday memo, risk analysts for Eurasia Group -- a leading investment consulting firm -- said the investigation would increase trade barriers and economic isolationism around the world.
"Brussels's willingness to go after a key Chinese export underscores growing protectionist tendencies in Europe, as the EU seeks to compete with China and the U.S. on the green and digital transitions," the note said.
