The government's hopes of getting a better free trade deal with China could have taken a hit.

This follows news that the Ministry of Business, Innovation and Employment has launched an anti dumping investigation into Chinese steel.

China's Commerce Ministry is calling it "discrimination" and said the investigation will hamper trade with New Zealand.

Former Ambassador to China Tony Browne said getting a free trade deal upgrade could get a lot harder.

"If they decide that they're going to take a very tough stance globally, they most probably would take a tough stance against New Zealand."

But there are low expectations China will punish the Government for launching an investigation.

Browne said any major retaliation is unlikely.

"I don't think the Chinese will be pleased, but I don't think they can be, or should be surprised.

"This is a difficulty they'll have to face not just with New Zealand," he said.