Beijing investigation denounces discriminatory and even “arbitrary” EU trade barriers

China said on Thursday that its investigation into the European Union’s implementation of the Foreign Subsidies Regulations (FSR) was subjecting the country to discriminatory trade barriers or even “arbitrary”. Chinese products are subject to treatment “more unfavorable” than products from third countries, underlined the Chinese Ministry of Commerce.

Beijing announced in July that it was investigating commercial practices deemed unfair by the European Union (EU), after a series of procedures from Brussels targeting Chinese companies suspected of distorting competition. China’s Ministry of Commerce said it had concluded that the implementation of the FSR discriminated against Chinese companies and “constituted obstacles to trade and investment”. According to him, the regulation has criteria “waves”which places a burden on targeted companies “a lot of uncertainty” and one “heavy load”.

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The ministry also criticized, in this 20-page document detailing its findings, surprise inspections “who have far exceeded the necessary limits” and the behavior of qualified investigators “subjective and arbitrary”. Businesses that fail to comply with these inspections risk “severe sanctions”source of “enormous pressure”.

Customs surcharges

The ministry said EU investigations had forced Chinese companies to abandon or scale back projects, with losses estimated at more than 15 billion yuan (nearly 2 billion euros). And that they have “harms the competitiveness of Chinese companies and products on the European market”. The European Union’s FSR is intended to prevent foreign subsidies from conferring an advantage on their recipients «indu» within the EU.

The first EU investigation under the FSR, in February 2024, targeted a subsidiary of Chinese state rail company CRRC. It was closed after the company withdrew from a tender in Bulgaria for the supply of electric trains. Another investigation targets Chinese solar panel manufacturers who wish to build and operate a photovoltaic park in Romania, partly financed by European funds.

The ministry did not specify whether Beijing planned to take retaliatory measures, but at the end of December, China announced that it was extending its anti-dumping investigation into imports of brandies (wine-based spirits) and cognac from the EU. Since October 11, Beijing has required importers of European brandies, of which cognac represents 95% of the total, to post a deposit or a letter of bank guarantee with Chinese customs, as part of an anti-dumping investigation. The move appeared as retaliation against Brussels after the EU imposed additional customs surcharges on electric vehicles made in China and sold in the EU.