China urges EU dialogue to resolve trade barriers, improve relations

China has accused the European Union of imposing 'unfair' trade and investment barriers against Chinese firms

China has accused the European Union (EU) of imposing unjust trade and investment barriers, but is seeking to improve relations through dialogue, according to a report by The South China Morning Post on Monday.

 

China recently concluded its six-month investigation into EU policies targeting Chinese firms, in a tit-for-tat move against the union. Despite the criticism, China has held back from immediate retaliatory actions, opting instead to continue negotiations aimed at resolving the dispute.

 

The conflict centres around the EU’s investigation into Chinese enterprises under its Foreign Subsidies Regulation (FSR), a move China’s Commerce Ministry deemed ‘unfair and non-transparent’ in a statement released on Thursday. The probe, initiated by Brussels last year, was designed to determine if Chinese government subsidies were distorting competition in the European market.

 

In response to the EU’s actions, China launched its own investigation in July, mirroring Brussels’ approach. While the Chinese ministry’s statement did not specify any immediate retaliatory steps, it emphasised that Beijing would push for adjustments in the EU’s practices through bilateral consultations. The goal, according to a ministry spokesperson, is to ensure a fair and predictable environment for Chinese businesses operating in Europe.

 

The findings from China’s investigation are expected to serve as leverage in ongoing negotiations and could justify potential retaliatory measures if necessary.

 

Background of the China-EU dispute

The trade dispute between China and the EU has been escalating, with the primary focus on the substantial government subsidies granted to Chinese firms. The EU argues that these subsidies provide Chinese companies with an unfair competitive advantage, prompting a series of regulatory measures. These include higher tariffs on Chinese-made electric vehicles and heightened scrutiny of Chinese firms in public procurement processes.

 

The introduction of the FSR in 2023 marked a significant shift in the EU’s approach. The first case under these new rules targeted CRRC Qingdao Sifang Locomotive, a subsidiary of China’s largest train manufacturer, for its activities in Bulgaria. Although the investigation ended inconclusively after the company withdrew from the project, it set a precedent for future probes.

 

China accuses FSR of ‘selective enforcement’

China’s Ministry of Commerce has criticised the Foreign Subsidies Regulation (FSR) for its ‘selective enforcement’, arguing that it unfairly targets Chinese companies. The ministry emphasised the regulation’s ‘vague’ criteria, which allegedly misclassified standard practices like VAT refunds as subsidies.

 

However, EU officials have defended the FSR, stating that the regulation applies equally to all companies, regardless of their origin. Olof Gill, the EU trade spokesperson, further clarified that the FSR aims to ensure fair competition by addressing distortions caused by subsidies from non-EU governments.

 

China-EU dialogues continue

China has expressed its intention to resolve the dispute through dialogue and negotiation, although it has not ruled out bringing the case before the World Trade Organization if necessary, The South China Morning Post reported.

 

The ongoing dispute comes at a time when China is seeking to boost trade with regions such as Southeast Asia and countries involved in the Belt and Road Initiative. However, maintaining stable trade relations with major partners like the EU and the US remains crucial for China’s economic stability.