China called for closer negotiations with Europe over proposed solar panel tariffs

China has called for closer negotiations with Europe over proposed solar panel tariffs after the European Commission agreed to levy tariffs averaging 47 per cent on Chinese made solar panels.

Commerce Ministry Spokesman Yao Jian said negotiations should be "taken up a level" so that the conflict could be resolved. "We do not wish to see a trade war," Mr Yao said in a statement. "Both sides have immense room for cooperation."

China is the world's largest producer of solar panels, and Chinese panel makers have come under fire from their competitors in Europe and the US, who accuse them of benefiting from illegal government subsidies. The US imposed punitive tariffs on Chinese panels last year.

The EU commission has called for provisional duties averaging 47 per cent on the panels, with some Chinese exporters paying as little as 37 per cent and others up to 68 per cent.

Beijing's unusually mild response suggests Chinese companies may try to negotiate for a reduction in the tariffs. China's previous statements on similar tariffs implemented by the US struck a much more strident tone.

EU officials have declined to comment on the duties, which Karel De Gucht, the trade commissioner, outlined for fellow commissioners on Wednesday.

Under EU rules, the provisional measures must be published in the bloc's official journal before June 6.

Even as Mr De Gucht has pressed for the duties he has not excluded a settlement, according to people briefed on his thinking.

One possibility would be a so-called 'price undertaking,' in which Chinese exporters agree not to sell their goods in Europe below a certain minimum price. So far, some Chinese solar companies - already struggling with thin margins - have shown little enthusiasm for such a plan, according to people familiar with the matter.

Europe is one of the biggest markets for Chinese panel makers, who sold €21 bn worth of solar panels to Europe in 2011. The proposed tariffs would be a huge blow to China's panel makers, many of whom are already facing the threat of bankruptcy due to low panel prices and huge oversupply.

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

Chinese solar companies not only sell solar panels to Europe, they are also significant buyers of European polysilicon and machinery, causing some European companies to worry about retaliatory trade measures in these areas.

Mr Yao did not comment directly on retaliatory measures. "If the EU sets a restraint on the product, China will protect Chinese companies' interests," he said, referring to solar panels.

Yingli Solar, the world's largest solar panel maker by sales, said it had cooperated closely with the European Commission's investigation, and believed that the conditions for punitive tariffs were "not fulfilled".

"Punitive tariffs—no matter at what level—will inevitably lead to higher prices for solar products threatening hundreds of thousands of jobs in the sector," said Rebecca Jarschel, director of public affairs at Yingli.