through investigations, Europe organizes the response to China

through investigations, Europe organizes the response to China
through investigations, Europe organizes the response to China

At the end of April, the European Union launched an investigation into Chinese public procurement in the field of medical equipment: Brussels believes that this market, historically dominated by European manufacturers, is increasingly protected by China, which closes the door to them. The finger is pointed at the Chinese law on public procurement, which includes local purchasing quotas, but also at Xi Jinping’s strategy called Made in China 2025and which imposes 70% Chinese hospital equipment by this date.

This investigation is in addition to two procedures launched at the beginning of April in the field of solar panels and wind turbines, unfairly subsidized to reduce their costs and win European markets. The automotive sector has been targeted since last year for the same reasons, and has become the symbol of the European response. Legislative response, therefore: according to Elvire Fabry, researcher at the Jacques Delors Institute, the Commission began by coordinating controls from 2020: “And she wanted to complete her toolbox at a time when the settlement of disputes at the WTO level had been blocked by the United States. The European Union needed to equip itself with instruments that would enable it to defend itself against the problems of trade distortion, in particular the problem created by the Chinese state capitalism system.

These instruments are two texts created and strengthened over the past two years: one, the Foreign Subsidies Regulation, concerns subsidies, and requires the declaration, under penalty of sanction, of any public support of more than four million euros. The other, the International Procurement Instrument, applies to public procurement and imposes reciprocity: if a country closes its own, Europe can exclude companies from its own public procurement.

The consequences were not long in coming: the Chinese national company CRRC was forced to withdraw from a 600 million euro railway contract in Bulgaria; reinforced customs duties on Chinese electric cars are also announced by the 27 for the end of spring.

Chinese model in crisis

China is particularly challenged by these regulations because its growth depends on exports in a few key sectors. Wang Wentao, China’s commerce minister, expressed his “very serious concern“in September. China, against all expectations, begins to defend the principles of free trade and denounces European behavior”protectionist“. The cause is growth which is struggling to pick up after covid: the 5% objective could be reached this year, but China suffers from a lack of domestic consumption.

The Chinese middle class fell into debt in the real estate sector and lost confidence and resources with its collapse. She no longer buys, despite the Party’s exhortations. The services sector also remains structurally underdeveloped. As a result, while it wanted to rely on its internal market, China must rely, even more than ever, on exports.

Its economy has turned away from finance, real estate, and consumer goods to invest in electric automobiles, batteries and solar panels. Three new pillars whose exports jumped by 28% in 2023, according to the American bank Citi, but which should slow down. European retaliatory measures are therefore very bad news for Beijing, which will have to find outlets elsewhere for its cars and panels. Perhaps in the countries of the South, by greening its commercial strategy, known as “Silk Road“.

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