­China's Huawei and ZTE could be about to face the threat of European sanctions after an investigation by the European Commission has reportedly found evidence of state subsidies from the Chinese government.

Both companies have long denied receiving any form of state-aid, although Chinese banks are particularly generous in financing vendor loans for clients of the two firms.

This is not the first time that EU officials have investigated the two companies.

Last year a report was said to have found evidence of "significant Chinese government support" for both Huawei and ZTE, including "massive" lines of credit from state-controlled banks.

ZTE's lines of credit amount to US$25 billion, which is exceptionally high for a company with annual sales of US$8 billion. Huawei is also understood to have benefited from large credit lines, including a $30 billion facility from China Development Bank.

Citing unnamed sources, the Financial Times newspaper reported that representatives from the EU's 27 member countries were informed of the results of the latest investigation at a closed meeting last Thursday.

The Commission is said to have "very sold evidence" that the two companies had been able to sell goods below cost in Europe due to the state subsidies. Such dumping activity is banned under World Trade Organisation rules, which China is party to.

The final report is expected to be announced next month, and if the two firms are found to have benefited, then the EU may impose punitive tariffs on their imports into Europe.

However, far from welcoming the report, it is reported that rival manufacturers are more worried about a political backlash in China if the EU presses ahead with sanctions. The loss of revenue in the mature European market seemingly being less of a concern than the potential gains from access to the Chinese market.