The European Union on Friday announced a probe into a subsidiary of Chinese rail giant CRRC suspected of using state subsidies to unfairly undercut European rivals.

Launched against a backdrop of rising trade tensions between China and the 27-nation bloc, the investigation is the first under new EU foreign subsidy rules that took effect last year. 

Internal Market Commissioner Thierry Breton said in a statement that CRRC Qingdao Sifang Locomotive was thought to have relied on subsidies to "submit an unduly advantageous offer in reply to a tender for electric trains in Bulgaria".

CRRC, the parent company of the probe's target, is the world's largest train manufacturer.

The Bulgarian transport ministry tender concerns 20 electric "push-pull" trains and their maintenance over 15 years -- for a total value of around €610 million.

The new rules oblige firms to notify the commission of any public procurement tenders in the EU worth more than €250 million, if they were also granted at least four million euros in foreign financial contributions in the three prior years.

"The commission considered it justified to open an in-depth investigation, since there are sufficient indications that this company has been granted a foreign subsidy that distorts the internal market," said a statement from the EU executive.

Under the Foreign Subsidies Regulation, the commission now has until July 2 to accept a proposed remedy by the company, to prohibit the contract's award, or issue a no-objection decision.

"European openness presupposes that everyone plays by the rules," Breton said.

"Ensuring that our EU single market is not distorted by foreign subsidies to the detriment of competitive firms that play fair is vital for our competitiveness and economic security."

CRRC has contracts in more than 110 countries and regions, from US cities to India and Latin America. In 2019, it acquired the German rail infrastructure group Vossloh.

The probe comes as the EU seeks to toughen controls on Chinese imports.

Last September, Commission President Ursula von der Leyen announced an investigation into Chinese state subsidies for electric vehicles, to shield European industry from prices judged to be "artificially low."

And in January Brussels unveiled a series of initiatives to prevent sensitive technology or infrastructure from falling into the hands of economic rivals such as China.