China's Ministry of Commerce (MOFCOM) has launched an investigation into the EU's use of the Foreign Subsidies Regulation (FSR) to obstruct Chinese investments in the EU. The move is aimed at protecting the legitimate interests of Chinese enterprises as well as upholding the multilateralism of trade rules. On June 17 MOFCOM received an application filed by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) requesting an investigation into trade and investment barriers set up by the EU against Chinese enterprises' investments in the EU. Measures to be investigated include preliminary examinations, in-depth investigations, and surprise inspections carried out by the EU targeting Chinese enterprises in accordance with the EU's FSR. The application mainly involved products such as rolling stock, photovoltaics, wind power and security inspection equipment, the Chinese Ministry of Commerce said. It may use questionnaires, hearings, field investigations and other means to obtain information from stakeholders and conduct investigations. The probe is to be completed by January 10, 2025, and may be extended to April 10, 2025 under special circumstances.
Launching the investigation is a move by Chinese authorities to protect the legitimate rights and interests of Chinese enterprises, as the EU is violating the rules of the World Trade Organization (WTO) in its investigation and evidence collection process, according to Cui Hongjian, Professor at the Academy of Regional and Global Governance of the Beijing Foreign Studies University (BFSU). Cui noted that the EU's practices constantly break the international rules, whereas the MOFCOM action is truly upholding the rules of multilateralism in trade. The China Chamber of Commerce to the EU (CCCEU) in June said in a statement it shared with the Global Times that Chinese companies reported that the European side exceeded the scope of the FSR investigation. “Despite the opposition of Chinese enterprises, the EU side copied documents containing information about the companies' key technology, which are classified as commercial secrets. We express strong dissatisfaction and opposition to the European side's improper practice of using investigations to gather intelligence on the advanced technologies of Chinese enterprises,” the CCCEU said in the statement.
On July 1, the European Commission Spokesperson for competition, Lea Zuber, denied the Commission had abused the FSR to steal business secrets, adding that the EU will continue to make “full use” of its legal and investigative mechanisms to ensure that non-European companies don't “unfairly benefit” from state subsidies. “Europe is now facing a series of economic and social crises, including inflation, energy shortages and rising prices for raw materials, so it's abusing trade protection measures, including setting tariff barriers to protect its increasingly hollowed-out manufacturing industries,” Zhao Junjie, Research Fellow at the Chinese Academy of Social Sciences' Institute of European Studies, told the Global Times. Zhao noted that neoliberalism “has failed,” and now the bloc is turning to “neoconservatism,” which may be even more damaging to its economy. “Europe is showing a great deal of shortsightedness with recent moves targeting China. Only a close cooperative relationship with China, while dealing with healthy competition, is the most favorable long-term policy for the development of Europe's industry,” BFSU's Cui noted, as reported by the Global Times.
Meanwhile, the South China Morning Post reports that EU authorities are investigating Chinese wind-turbine companies in Germany for having received state subsidies. The EU launched a preliminary inquiry in April into what it called “market-distorting” subsidies received by unnamed Chinese wind-turbine operators in Spain, Greece, France, Romania and Bulgaria. Subsequently, wind developers and turbine manufacturers came forward with new information, tipping the Commission off to “potential distortions in the development of wind projects in other member states, including in Germany”, Spokeswoman Lea Zuber said. While the FSR was adopted last year, the EU only started using it in 2024, in four of the five cases targeting Chinese firms in the rail, solar, wind and surveillance-equipment sectors.
The instrument is triggered automatically when “distorting” subsidies are suspected to have been received by companies bidding for procurement tenders or entering merger-and-acquisition processes within the EU’s single market. The Commission also has the power to launch investigations of its own when it suspects a company to have received subsidies that disadvantage local competitors without declaring them. This ‘ex-officio’ method is how Brussels is exploring alleged distortions in the wind-turbine sector. To comply, firms are required to hand over voluminous and detailed information about their operations within tight deadlines. Rather than comply with the EU’s investigations, Chinese rail and solar companies have withdrawn from lucrative procurement tenders.
