Beijing urged Brussels on Friday to honor its international obligation to treat China as a market economy, after the European Parliament passed a non-binding resolution of refusal.
European experts said the parliament's decision could result in the China-EU relationship becoming embroiled in a tit-for-tat scenario.
On Thursday, the European Parliament voted to refuse China market economy status, with many members saying that China has not met the five criteria for a market economy set by European institutions.
The UK, the Netherlands and the Nordic countries support China's market economy status. Germany supports it, in principle, but wants safeguards for sensitive industries, while Italy is strongly opposed.
China is recognized as a market economy by 80 countries including Russia, Brazil, New Zealand, Switzerland and Australia.
An unidentified representative of China's Ministry of Commerce said on Friday that the European Union must observe the accession articles of China's entry into the World Trade Organization.
These stipulate that China should be automatically given market economy status in December this year after a 15-year transition period.
The ministry said this international obligation must be shouldered by all WTO members and the European Union is no exception.
Beijing maintains that granting market economy status is dependent on international rules rather than domestic criteria.
To deny such status to China would be a strong political signal from the EU and could well lead to deterioration of the recent warming political relationship between the two economies, said Luigi Gambardella, president of ChinaEU, a non-profit organization in Brussels that promotes bilateral digital and internet cooperation.
In the short term, there are concrete risks of retaliation from China, Gambardella said.
"Closing the door to China may thus have very negative effects," he added.
Lin Guijun, a professor of international trade at the University of International Business and Economics in Beijing, said that imposing anti-dumping investigations on European wine, auto parts or vehicles could be a way for China to warn the EU that it is not reasonable to persist in trade protectionism, especially in the current global business setting.
The EU has remained China's top trading partner for 12 years, while China has remained the EU's second-largest trading partner for 13 consecutive years.
Ma Yu, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing, said, "For China, having (market economy status) would make it harder for Europe or other economies to impose anti-dumping duties on Chinese goods sold at knock-down prices under the WTO rules, because it would change the method for determining a fair price."
Ma said that is why the EU is unwilling to offer such status to China, since it does not want to see China's foreign trade become more flexible under the WTO framework.
The EU has repeatedly launched defensive trade measures since last year, seeking to impose punitive tariffs against China's competitive steel products.
