China Pressures EU for Talks to Resolve ‘Unfair’ Trade Barriers

China says the EU has used its Foreign Subsidies Regulation to unjustly target Chinese enterprises, but has yet to announce any retaliatory measures

[ABS News Service/10.01.2025]

Beijing has accused the European Union of imposing unfair “trade and investment barriers”, but has refrained from immediate retaliation as the two sides continue talks to resolve the dispute.

China’s Commerce Ministry announced on Thursday that it had concluded the EU’s recent investigations into Chinese enterprises under its Foreign Subsidies Regulation were “unfair and non-transparent”.

Brussels launched an investigation to determine whether Chinese government subsidies were undermining competition in the European market last year, prompting China to start its own probe in a tit-for-tat response.

The Chinese ministry’s statement did not disclose whether China would take any retaliatory measures in light of the probe’s findings.

Through bilateral consultations, China will request the EU to adjust or modify its practices to “provide an open, fair, just, non-discriminatory, and predictable environment for Chinese enterprises to invest and operate in Europe,” a commerce ministry spokesman told a media briefing on the same day.

The probe’s findings will provide China with evidence it can use during negotiations with the EU and a reasonable basis for potential retaliatory actions, said He Weiwen, a senior fellow at the Centre for China and Globalisation, a Beijing-based think tank.

China and the EU have been locked in a long-running dispute over the level of government subsidies received by many Chinese enterprises, with the EU arguing the subsidies may provide China’s firms with an unfair advantage.

The EU has not only used anti-subsidy rules as grounds to hike tariffs on Chinese-made electric vehicles, but also to investigate Chinese companies participating in public procurement bids in the EU market.

After the FSR came into effect in 2023, the European Commission launched its first case under the rules last February, investigating a subsidiary of China’s largest train manufacturer, CRRC, for its bidding activities in Bulgaria.

The company, CRRC Qingdao Sifang Locomotive, later withdrew from the project, and the investigation was closed without yielding any conclusive findings.

In a document outlining the probe’s findings, China’s Ministry of Commerce stated that the FSR exhibited “selective enforcement” by specifically targeting Chinese companies and products.

It also said the FSR had “vague” criteria for foreign subsidies, which mistakenly classify normal practices – such as VAT refunds – as government subsidies.

Lea Zuber, the EU’s competition spokeswoman, rejected this characterisation of the FSR. “All companies irrespective of the country of head office or nationality have this regulation applied equally to them,” she said on Thursday.

Olof Gill, the EU trade spokesman, also said in a statement that the FSR was designed to ensure fair competition and a level playing field across companies and member states within the EU, by allowing the European Commission to address distortions caused by subsidies granted by non-EU governments.

Foreign subsidies likely to distort the internal market are those which are improving the unduly competitive position of a company, such as “when a non-EU government would give unlimited guarantee for debts to a company,” the statement said.

China will seek to resolve the dispute with the EU via consultations before resorting to retaliatory measures or bringing the case to the World Trade Organization for adjudication, said He, who previously worked as a commercial counsellor at the Chinese consulates in New York and San Francisco.

After the EU announced additional tariffs on Chinese electric vehicles last October, China’s response was relatively restrained, with the country imposing provisional anti-dumping duties on imports of brandy originating in the EU.

Following the EV tariffs, China said it advocated resolving trade conflicts through dialogue and was conducting a “new phase of consultations” with the European bloc.

China is likely to experience a decline in exports in 2025 regardless of the outcome of its trade dispute with the EU, He predicted.

Chinese exporters will face challenges in the US market after Donald Trump returns to the Oval Office, while countries like Mexico and Vietnam have come under pressure to refrain from serving as transshipment hubs for Chinese manufacturers trying to evade US tariffs, he noted.

China’s exports to Europe are also likely to decline from last year due to the ongoing trade frictions, according to He.

While China’s exports to Asean, or the Association of Southeast Asian Nations, and countries involved in the Belt and Road Initiative are projected to increase, the growth will not be enough to compensate for the lost market share in developed economies, he said.

“China will persist in advancing trade with the Global South, yet it remains critical to stabilise trade connections with major partners like the US and the EU.”

Enrico Colombatto, a professor of economics at the University of Turin and chairman of the scientific committee at the Institute for Research in Economic and Fiscal Issues in Paris, echoed a similar sentiment.

“If Asean does not solve China’s export problems, Beijing will have to strengthen its ties with Europe,” Colombatto wrote in an article released on Wednesday.

Yet, Colombatto predicted a murky outlook for China-EU trade relations in 2025, as Europe grappled with the impact of China’s economic slowdown, trade barriers and any additional harm stemming from Washington’s policies.

Meanwhile, European producers are likely to expedite their transition to more favourable entrepreneurial environments, primarily in the US and potentially Southeast Asia, he added.

“This phenomenon will further weaken Europe’s productive capabilities.”