India, May 29 -- The European Union edged toward its sharpest confrontation with China in years on Friday, as the bloc's executive met to weigh a new arsenal of trade weapons aimed at Chinese industrial overcapacity, even as one of its largest members backed away from the fight and Beijing warned that it was ready to strike back.

The College of Commissioners gathered for a policy orientation debate that officials had billed for weeks as a turning point in Europe's economic relationship with its second largest trading partner. On the table was a so-called overcapacity instrument that would let Brussels cap imports of Chinese goods sector by sector, alongside a plan, the Guardian reported, to force European companies to spread their purch...