China Says EU’s ‘Unfair’ EV Subsidies Probe Risks Damaging Ties

China’s ambassador to the European Union called the bloc’s probe into Chinese electric vehicle manufacturers over state subsidies “unfair,” delivering a veiled warning that more European products could face trade investigations.

In an interview with Bloomberg, Fu Cong noted that the EU subsidizes many of its own companies and said that if China took the same approach as the bloc has done, “there are many things that could be subject to investigation.”

China is cooperating with the EU’s probe “because we do want to avoid a situation that the two sides will have to resort to trade measures against each other,” he added.

Trade tensions have been rising since the EU opened its EV investigation and China this month announced an anti-dumping probe into brandy sales. European Commission President Ursula von der Leyen last year laid out a strategy of “de-risking” but not “de-coupling” from China, a formulation that other countries, including the US, quickly echoed.

On Wednesday, the EU will unveil a set of proposals aimed at defending itself against coercive economic steps by countries like China and Russia, including rules that would allow it to screen and potentially block foreign investment in sensitive industries.

Those measures are “mostly targeted at China,” Fu said. China “fully understands” the desire of European countries to enhance economic security, but the EU’s recent steps amounted to overreaching, he added.

“Everything seems to be harming the EU’s security,” Fu said. “But the question is, where do you draw the line and where are the boundaries and how do you strike a proper balance between economy and the security?” he said.

Chinese President Xi Jinping has repeatedly called for such a “balance,” but many economists and business executives say a greater security emphasis has crimped economic growth.

Since taking up his latest role in Brussels in December 2022, Fu has published near-daily English language posts on social media platform X.

He hasn’t typically been associated with a more assertive style of diplomacy linked to China’s so-called Wolf Warriors.
Taiwan Warning

However, in the interview, he issued a stern warning against the EU pursuing any kind of trade or investment deal with Taiwan.

Taiwanese officials have floated proposals to sign some kind of investment deal with Europe as the Democratic Progressive Party tries to build on momentum from its victory in the island’s presidential elections this month.

The EU parliament last week passed a resolution reaffirming support for an investment treaty with the self-ruled island, a largely symbolic move because any such treaty would need approval from member states.

Such steps would violate the EU’s one-China policy, which recognizes Beijing as the sole legal government of China, Fu said.

“We are firmly opposed to that and it’ll seriously harm our relations with you if that happens,” he added. “This is only an idea but I want to make our position clear upfront and that there should be no misunderstanding concerning China’s position.”
EV Methodology

Fu criticized how the EU is carrying out its EV probe, citing what he called the “deliberate exclusion” of key companies from the investigation.

The sample of firms only includes Chinese firms and not companies like Tesla or European brands that manufacture in China through joint ventures. The selected companies are more representative of the problem the EU is looking to tackle, people familiar with the decision have told Bloomberg.

Some of the sampled firms are more likely to get hit by higher duties, while non-sampled companies would be subject to an average.

Asked whether China would respond to any tariffs on EVs with counter-measures, Fu said: “Let’s wait and see, we hope that that will not happen.”

China’s brandy probe was widely seen as retaliation for the bloc’s EV announcement, but Fu called it a response to concerns from Chinese companies. “I don’t want to say that this may proliferate into other European items,” he said when asked about the investigation.

Despite all the tension, Fu said the EU and China have lots of scope for cooperation, particularly if Europe can build a stronger economy and develop its own foreign policy. Chinese officials have often pushed the EU to develop a foreign policy that is distinct from the US.
Strategic Autonomy

“If Europe wants to play a bigger role in the world, first they need to exercise more strategic autonomy, in their own words, and be true to that strategy,” he said. “On our side, we are sincere in cooperating with the EU and we do hope that this sincerity could be reciprocated.”

As an alternative to limits on trade and investment, China wants to set up a dialog mechanism that “makes sure that neither side will weaponize the others’ dependency,” Fu said. “China is willing even to take legally binding commitment,” he added, without providing specifics.

The pace of meetings between Chinese and EU officials has picked up over the past two years, but they often have yielded little progress. In 2022, EU foreign policy chief Josep Borrell described a summit meeting with China as a “dialog of the deaf.”

Back in 2020, China and the EU agreed on an investment treaty that would have given EU companies in China more market access, but the European Parliament refused to ratify it after China sanctioned several lawmakers.
Chip Limits

Fu also criticized discussions about the EU imposing controls on technology, such as advanced semiconductor-manufacturing equipment made by companies like ASML Holding NV in the Netherlands. Under pressure from Washington, the Dutch government banned the company from selling certain high-end equipment to China.

“I don’t know what kind of measure China will take in response to that, but of course we are still working,” Fu said on the chip restrictions, adding that the Netherlands and the EU should be careful about cutting off ASML’s sales to Chinese companies.

“Without the Chinese market, I don’t know how long they will maintain their dominant place,” he said, “and don’t underestimate the ingenuity of the Chinese scientists and engineers.”

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