The Financial Times quoted unidentified EU officials and executives as saying that the commission had been gathering evidence in a case against China-based Huawei and ZTE Corp.

"Huawei has not received any communication from the European Commission regarding an investigation, but we are aware of media reports on this matter," Huawei, the world's No.2 telecom equipment vendor after Sweden's Ericsson, said in an emailed statement.

"We deny claims made in the media that Huawei employs dumping practices and has benefited from illegal state subsidies. Huawei also objects to the investigation that the European Commission is reportedly launching on the basis of these claims."

China is the European Union's second-biggest trading partner after the United States, and the bloc is China's biggest trade partner, with trade between the two forecast to hit a record 500 billion euros ($397 billion) this year.

Despite the flurry of trade between both sides, relations have been tense, with EU Trade Commissioner Karel De Gucht complaining that China subsidizes "nearly everything", distorting competition.

Huawei employs more than 7,000 employees and has indirectly created over 6,000 job opportunities in Europe, it said. In 2011, it purchased products and services in Europe totaling over 2.9 billion euros ($3.6 billion).

(Reporting by Lee Chyen Yee; Editing by Chris Gallagher)

• A Permanent Economic Emergency