EU Denying Market Economy Status (MES) to China would be a strategic mistake, and it may well cause deterioration of political relationship between EU and China, Luigi Gambardella, president of ChinaEU, a business-led association, said in a recent interview with Xinhua.

In a non-legislative resolution on Thursday, the EU lawmakers were opposed to recognizing China's MES as set out in global trade rules.

China joined the World Trade Organization (WTO) in 2001. Under the country's accession protocol, China will automatically transit to a market economy status for Europe by Dec. 11, 2016.

Gambardella told Xinhua that if the EU denies MES to China, in the short term, there are concrete risks of retaliation from the Chinese side, causing EU economies serious pain and uncertainty on what will be the end result.

"It could threaten the positive outcome of the ongoing negotiations for the bilateral investment treaty and the potentiality to conclude a FTA between China and the EU - which according to Commission estimates could raise European prosperity by 250 billion euros," said the president.

"Moreover China is the first, and only, non EU country which has so far generously committed to invest in the Juncker Plan," he stressed. Closing the door to China may thus have "very negative" effect.

One of the main drivers of the MES debate is the fear of job losses in Europe's less competitive manufacturing industries.

Gambardella believes it is time for the EU to reflect on why its ability to compete with other economies is getting worse in many sectors.

"One of the reasons no doubt, lies in the burden of EU over-regulation, which hampers overall industrial ability to innovate and invest," Gambardella said.

According to him, the EU could face negotiations in a stronger position when it comes to defend its industry and the jobs of European citizens: there would probably be fewer dumping disputes if European governments would proceed with the necessary structural reforms, and if market players could enjoy better competitiveness conditions.

"With China, what needed is more dialogue, not less. We need to find win-win solutions rather than to start a new fight. Today the key word is cooperation," he told Xinhua.

Earlier this year, Chinese Foreign Ministry spokesman Hong Lei has urged the EU to obey the WTO rules and stop its unfair treatment towards China.

The EU is an important member of the WTO, a vital supporting force to the multilateral trade and international legal systems, Hong said, adding that China hopes the EU will fulfill its commitments to China's entry into WTO.

Gambardella said a wise decision should be to adopt a forward looking political approach, whereby granting MES could be used by the European institutions to strengthen the bilateral dialogue with the Chinese authorities in support of the institutions' endeavor to facilitate the business activities of EU companies in China.

"As the saying goes, the best way to win a dispute is to avoid it. History has demonstrated that dialogue and cooperation, not conflict, are able to overcome misunderstandings and reduce distances. Europe must not to be afraid of China. Fear is a bad advisor," he said.

ChinaEU is a business-led association headquartered in Brussels that aims to strengthen joint research and business collaboration and investment in the sectors of Internet, telecommunications and high-tech between China and Europe.