A series of investigations into Chinese companies in Europe may deepen the conflict over subsidy disputes.
Foreign companies are required to report subsidies received within three years for EU public tenders.
The nine-month probe focuses solely on “Chinese,”
indicating a potential escalation of the issue on the future agenda.
According to Bloomberg and the South China Morning Post (SCMP) on the 24th, the European Union (EU) is reportedly investigating unfair trade practices, such as the Chinese government’s subsidy payments ahead of Chinese President Xi Jinping’s tour of Europe.
According to the report, EU Commission officials and local authorities in the Netherlands and Poland raided local Chinese businesses on the 23rd (local time). They spent considerable time investigating, including searching for employee contacts in the information and communication technology (ICT) system. The EU Commission confirmed the unannounced visit but added, “This investigation is a preliminary stage of the distorted overseas subsidy suspicions,” and “the next step will be an in-depth investigation.”
The EU Commission has been intensively investigating Chinese companies’ compliance with the EU Foreign Subsidy Regulation (FSR). The FSR regulates foreign companies that have received excessive subsidies from third countries and have lowered their product prices to participate in EU mergers or public tenders. According to the FSR, foreign companies must report in advance if they have received at least 4 million euros (about $4.5 million) in subsidies from a third country in the past three years when the scale of public tender contracts in EU member countries exceeds 250 million euros (about $282 million).
The EU investigates unfair trade and determines whether there is a problem. If there is a problem, it can limit Chinese companies’ access to the EU procurement market. For example, punitive tariffs can be imposed on Chinese products based on the results of the anti-subsidy investigation.
Interestingly, all three investigations conducted since the full implementation of the FSR in July last year have targeted Chinese companies. CRRC Corporation’s subsidiary, China Railway Construction, became the first subject of investigation after participating in a Bulgarian public procurement tender. They were embroiled in suspicions of receiving $2 billion in subsidies from the Chinese authorities while carrying out a project to provide maintenance services for 20 electric trains. When the EU Commission started the investigation in February, the company completely withdrew its business participation plan.
Also, Margrethe Vestager, the European Commissioner for Competition, announced on the 9th that “we will start a new investigation into Chinese wind turbine suppliers.” The companies under investigation reportedly relate to Chinese wind farms in Spain, Greece, and other European countries. The SCMP reported that the China Chamber of Commerce in the EU expressed serious concerns about this investigation.
Since last October, the EU’s investigations have expanded from Chinese electric cars to Chinese solar panels, trains, and wind turbines. On the same day, the EU announced that it had started investigating Chinese companies’ public procurement of medical devices.
According to Bloomberg, these anti-subsidy issues are expected to be significant when Chinese President Xi Jinping visits EU member countries France, Hungary, and Serbia early next month. Earlier, German Chancellor Olaf Scholz warned during his visit to China last week that if China does not alleviate concerns about unfair competition and dumping (retaliatory tariffs), Europe will impose more trade barriers.
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