Paper tariffs spark EU-China 'trade war'

Yao said Beijing would move to protect the interest of local companies.

"The Chinese side is strongly discontent with the EU's wrong decision and will firmly oppose it," Yao said in a statement posted on the ministry's website.

Hours earlier the EU announced its intention to raise tariffs on Chinese exports of high-end glossy paper used for magazines and catalogues.

It is the first time the European Commission has acted against subsidies which EU manufacturers say give Chinese firms an unfair advantage on international markets.

The main subsidy given to the Chinese paper makers is cheap funding from government-controlled banks, with the EU duties set to last five years, said the commission.

"This is the first time we have ever put in place measures against the strategic and targeted subsidisation of a specific industry by the Chinese government," said commission trade spokesman John Clancy.

"Today's measures will restore effective and fair trade conditions on the EU market."

Experts said the move was likely to start of a series of tit-for-tat retaliations and worsening trade relations between the two sides.

"As the EU subsidises local production in various sectors, China is not short of sectors to retaliate against," Hosuk Lee-Makiyama of the Brussels-based European Centre for International Political Economy (ECIPE) think-tank said in a policy brief.

"It has already imposed a tariff on potato starch from the EU and more cases are forthcoming," he added.

"A trade war with China on subsidies seems now unavoidable."