The European Chinese Chamber of Commerce strongly criticized the EU authorities’ raid on the site of a Chinese security equipment manufacturer on Tuesday. According to the interest protection organization, this undermines the trust in the EU among foreign companies. The European Commission and local law enforcement officers raided the company’s offices in Poland and the Netherlands on Tuesday morning, the first time the Commission has put its new powers against foreign subsidies into practice. The chamber accused the EU of using anti-subsidy investigations as a weapon to suppress Chinese companies.
The raids come as the EU launches a subsidy investigation into the procurement of Chinese medical equipment, which threatens further Chinese retaliation. China is increasingly accused by the United States and EU institutions of flooding them with dumped goods and of using illegal market practices to make its own companies dominant in the world’s two largest single internal markets.
Beijing has already argued against Western accusations of oversupply that the US and its allies are trying to suppress and rein in its industry, and has launched an anti-dumping investigation into French liquor imports in response. The growing friction sets a particularly tense tone for Chinese President Xi Jinping’s European trip planned for next month, when he is expected to meet his French counterpart, Emmanuel Macron, as well as Hungarian Prime Minister Viktor Orbán.
EU sources confirmed to Portfolio that several industries that have become crucial for Hungary may be targeted due to state subsidies:
data will soon be collected for subsidy investigations or for procedures concerning prohibited state subsidies in the case of the battery industry, its supply chains and internal market vehicle production.
Last year, the Foreign Subsidies Regulation (FSR) entered into force in the European Union, which gives the European Commission new powers to investigate and apply retorts if a company outside the EU is market-distorting with state subsidies from a third country. capitalize in a way. This can be done with direct transfers, but also indirectly, even with controlled public procurement. Put simply: Brussels can impose a fine if it sees that a company is being capitalized by a non-EU country in such a way that it can then buy up other companies on the internal market and gain an unfair competitive advantage.
Contemporary Amperex Technology (CATL) received 2.85 billion yuan (380 million euros) in government funding in the first half of last year alone, a nearly three-fold increase from a year earlier. But according to the suspicion, the battery manufacturer investing in Debrecen may have received more than 2 billion euros of state aid in the last 5 years.
EVE Energy, one of CATL’s main competitors, received 1.08 billion yuan (150 million euros) in the first half, about four times as much as a year earlier.
Among EV assemblers, Shanghai-listed SAIC Motor was the biggest recipient of government subsidies, receiving more than 2 billion yuan in subsidies, nearly double the amount from a year earlier. BYD, China’s leading EV seller, received 1.78 billion yuan in the first half, nearly three times as much as a year earlier. Chongqing Changan Automobile received 856 million yuan in state aid – according to previous Nikkei tallies, which only cover the first half of 2023.
In addition, as our sources have pointed out: these are only direct budget subsidies, they do not include controlled public procurement.
If the European Commission initiates an FSR procedure because of the listed subsidies, it could be painful for Hungary as well. CATL, BYD and EVE are also preparing for Hungary, all three companies have already started the construction works of their factories.
Through the FSR, the European Commission can decide to impose fines, but in extreme cases they can also limit the activities of companies in the EU internal market.
For the time being, it is therefore still questionable what exactly steps will be taken. For the time being, data collection is taking place, and after the preliminary evaluation, a formal investigation can be started, and finally, a retort decision can come if the Commission’s suspicions are confirmed. All this can be achieved in 6-12 months.
The European Commission has not yet responded to our official request.
Hszi comes, the table is overturned
The EU is China’s second largest trading partner and one of the most important sources of foreign investment. However, tensions between Beijing and Brussels are growing as the EU launched several anti-subsidy investigations in recent months. The bloc accuses China of trying to oppress internal market players with industrial overcapacity, and the Beijing leadership achieves all this with state subsidies. Based on the Commission’s resolutions – and publicly available data, such as stock market reports – companies in the electric vehicles and renewable energy sources sector, which compete directly with European companies, are financed in particular.
The European Commission said in a statement that Tuesday’s raid was carried out at the unnamed Chinese company because it is suspected that the investigated company may have received foreign subsidies that could distort the internal market. The Chinese Chamber said that enforcement agencies authorized by the European Commission seized IT devices and mobile phones, examined documents and requested access to relevant data.
The Asian country’s advocacy organization accused the EU of unjustifiably cracking down on the Chinese company and called on the European Commission to ensure a truly fair and non-discriminatory business environment for Chinese businesses.
According to Chinese Commerce Minister Wang Wen-tao, the growing friction between China and the EU reflects a broader trend of growing trade protectionism and escalating geopolitical conflicts. At a press conference in Beijing last week, Vang warned that the world trade environment had deteriorated in 2024, citing growing trade protectionism and intensifying geopolitical conflicts as the main challenges. But he also highlighted the rapid growth of China’s three new industries — electric vehicles, solar products and lithium batteries — that have boosted the world’s second-largest economy as it grapples with a severe downturn in the real estate market, deflationary pressures and low investor confidence.
There is growing alarm over the prospect of China’s cheap exports flooding markets in developed countries and threatening jobs in key industries such as autos and solar and wind power.
This year, the European Commission will close the anti-subsidy investigation into Chinese electricity production, which may result in the introduction of higher tariffs on Chinese imports. Brussels is also considering emergency support measures for the solar industry, including an anti-dumping investigation. Meanwhile, the US has introduced export controls on high-tech shipments to China.
The contradictions between China’s industrial policy and the market-oriented capitalism of developed countries became urgent for the EU in 2022, when China posted a record trade surplus of nearly 400 billion euros against the bloc. Brussels announced the anti-subsidy probe as Chinese electric cars began to gain market share in the internal market last year. In addition, the war in Ukraine and the pandemic have convinced European leaders that they need to diversify their critical supply chains, such as sourcing rare earth metals from elsewhere, as China dominates them.
Their measures were taken in parallel with the American measures. In addition to limiting Chinese access to advanced semiconductors and increasing controls on investment in and out of China, President Joe Biden signed anti-inflation legislation in 2022 to strengthen the US renewable energy manufacturing supply chain. European Commission President Ursula von der Leyen told reporters during her visit to Beijing in December, when she called on President Xi Jinping, that
the EU wants to “de-risk” its relationship with China and diversify supply chains to increase flexibility.
Chinese officials responded by criticizing Europe’s restrictive economic and trade policies. Wang Lutong, director-general of European affairs at Beijing’s foreign ministry, who attended the talks with the EU delegation, attributed China’s industrial development to innovation alone. However, the ambitious policy aimed directly at reducing the economy’s dependence on foreign countries has been ongoing for decades. This was originally motivated by the fact that China wanted to catch up with its Western counterparts, after the economy had been largely isolated in world trade for decades under the leadership of Mao Zedong.
Cover image source: EU
Tags: Brussels Chinese companies starting battery manufacturers
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