Chinese Railroad Company Pulls Out of Bulgaria as EU Probes Into Unfair Subsidy Begins

A Chinese state-owned company, which had won a public tender project in Bulgaria, a member of the European Union (EU), has abandoned the contract after initiating an EU investigation into unfair subsidies.

The EU Commission announced on the 26th (local time) that CRRC Qingdao Sifang, a subsidiary of CRRC, withdrew from the tender contract for public procurement it had signed with the Bulgarian Ministry of Transport. Consequently, the EU Commission has stated it will also conclude its investigation into the suspected subsidies received by CRRC Qingdao Sifang approximately six weeks after the announcement of the investigation.

Previously, CRRC Qingdao Sifang had won the contract by bidding to manufacture 20 electric trains for 610 million euros ($660 million). However, suspicions arose that they received subsidies from the Chinese government as their bid was about half the amount offered by other companies, such as Spain’s Talgo. In response, the EU Commission announced on the 16th of last month that there were “sufficient signs of having received foreign subsidies with the extent of distorting the domestic market” and that they would investigate whether there was a violation of the Foreign Subsidy Regulation (FSR). This was the first investigation under the FSR, introduced in July last year.

The FSR requires companies that signed a public tender contract exceeding 250 million euros ($270 million) with an EU member state to report in advance if they have received at least 4 million euros ($4.3 million) in subsidies from a third country within the last three years. The regulation was introduced to ensure that EU companies, subject to strict subsidy regulations, do not suffer disadvantages due to foreign companies receiving indiscriminate subsidies. Violating this regulation can result in a fine of up to 10% of the total sales.

Thierry Breton, EU Commissioner for the Internal Market, said, “The EU’s single market will be open to companies that compete fairly and play by the rules,” adding, “(We will continue to take) all necessary measures quickly and decisively to maintain Europe’s economic security and competitiveness.”