China says EU’s foreign subsidy investigations constitute trade, investment barriers

China’s Ministry of Commerce said on Thursday that the European Union (EU)’s practices in its foreign subsidy investigations against Chinese enterprises have constituted trade and investment barriers.

The announcement followed the conclusion of a six-month probe, which was initiated at the request of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.

Under its foreign subsidies regulation, the EU has conducted preliminary, in-depth and raid investigations into Chinese companies in sectors such as locomotives, photovoltaics, wind power and security check equipment, said the ministry when initiating the probe into trade and investment barriers last July.

The EU’s investigations involved unreasonable practices that violated the World Trade Organization’s core principles, including non-discrimination, the ministry said, citing stakeholders who participated in the probe.

The stakeholders believe that the EU’s investigations consisted of inappropriate penalties and unreasonable time constraints, and lacked procedural transparency and legitimacy, according to the ministry.

The probe found that during the investigations, regulations were “selectively enforced” and the criteria used to determine foreign subsidies were vague.

It also noted that the scope of the EU’s investigations was overly broad, placing an “immense burden” on the companies, and that key concepts, such as market distortion, were defined in a “subjective and arbitrary” manner.

Such investigations have harmed trade and investment between China and the EU by restricting Chinese companies’ products, services and investments from entering the EU market, thereby damaging the competitiveness of relevant Chinese companies and products, the ministry said.

The probe results revealed that Chinese enterprises have incurred significant economic losses, both directly and indirectly, due to the EU’s investigations, including approximately 7.6 billion yuan (about $1.06 billion) in abandoned bidding projects, with other affected projects valued at over 8 billion yuan.

The ministry also noted that the practices could lead to increased business operational costs, higher consumer prices and certain job losses within the EU, ultimately hindering the stable economic and social development of EU members.

During the probe, the European Commission did not submit any completed answer sheets provided by the ministry or offer related comments, He Yadong, the ministry spokesperson, said at a press conference.

The ministry will take measures, including bilateral consultations, to urge the European side to adjust or change relevant practices in order to ensure an open, fair, just, non-discriminatory and predictable environment for Chinese enterprises to invest and operate in Europe, He said.