The European Union will take further action against Chinese state subsidies that hurt European interests, but regulators need European whistleblowers to help them succeed, the EU's trade chief said.

"We have come to the conclusion in the European Commission that the real problem with China is subsidisation," EU Trade Commissioner Karel De Gucht told reporters while visiting Finland. "We are taking more and more action in that respect."

But EU trade officials rely on EU firms to provide evidence that aid and financing programmes give advantages to their Chinese rivals -- and many EU firms operating in China are reluctant to do so for fear of retaliation, De Gucht said.

"The big problem with subsidisation is that we need proof. We cannot start a case against a country... if we have (insufficient) proof. And that proof has to come from the companies," he said.

"A lot of companies are ready to say off the record this is unacceptable, do something about it, but afraid of coming out and saying this publicly."

The legality of Chinese state subsidies is coming under increased investigation by the EU, particularly as Chinese production encroaches on sectors in which the EU has traditionally been strong, such as cars and telecoms networks.

That focus has heightened tensions between the EU and China. China denies its industrial programmes are illegal and is fighting at the World Trade Organization for its right to continue them.

De Gucht said the EU would press ahead despite the tensions.

The European Commission recently cited "massive" state aid for China's telecoms firms as an example of illegal support.

But subsidies are not limited to that sector, De Gucht said.

Chinese subsidies pose a problem to the EU "not only in telecom, but in all sectors," he said.

It has also proposed the EU's first anti-subsidy tariff against China over support for glossy paper manufacturers. If approved by EU states next month, the duties could set a precedent for similar cases, EU diplomats say.

"China is rather upset about it, but we are going to continue with that," De Gucht said. (Reuters)