China will launch an inquiry into whether to impose countervailing duties on potato starch imports from the European Union, the commerce ministry said.

China will launch an inquiry into whether to impose countervailing duties on potato starch imports from the European Union, the commerce ministry said on Monday, its first such proposed action against the 27-nation bloc.

The ministry anounced the investigation on its website (www.mofcom.gov.cn), saying Beijing would examine the size of subisides for potato starch from the EU, its biggest trade partner, and whether they harm the Chinese industry.

The number of anti-dumping and countervailing cases initiated by China against other countries and vice-versa is rising, a sign of increasing trade friction following the global financial crisis.

Many of China's trade partners would like to see faster appreciation of the yuan, saying that an undervalued currency gives Chinese exporters an unfair competitive edge.

The United States has been particularly vocal in its criticism of China's currency policy, but the EU has also become more outspoken recently.

The EU thinks China has made only limited progress in allowing the yuan to appreciate and swifter action would help safeguard a fragile economic recovery, according to a draft G20 document obtained by Reuters.