The Ministry of Commerce Photo: VCG

China’s Ministry of Commerce (MOFCOM) announced on Thursday that it has determined that the practices adopted by the EU in its investigations of Chinese enterprises based on the Foreign Subsidies Regulation (FSR) and its implementing rules constituted trade and investment barriers.

The ministry, following a request from the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, issued an announcement on July 10, 2024, deciding to initiate an investigation into the EU's practices in its investigations of Chinese companies under the FSR, in accordance with Chinese laws.

The investigative body posted a notice on the MOFCOM website on September 5, 2024, inviting relevant government agencies, enterprises, and business associations to participate by completing a questionnaire.

The investigative body sent the questionnaire on trade and investment barriers to Delegation of the EU in China on September 5, 2024, and the EU delegation confirmed receipt of the questionnaire, which noted it had forwarded it to the relevant departments of the European Commission (EC). The EC failed to submit the completed questionnaire or provide comments within the specified time frame, the MOFCOM said in the announcement on Thursday.

The Chinese investigation authority conducted on-site investigations at enterprises involved in railroad locomotives, photovoltaics, wind power, security inspection equipment, and other sectors affected by the EU FSR probes, to verify the relevant EU practices, assess the specific impacts on those enterprises, check economic losses, and gather their opinions and suggestions on the investigation of the trade and investment barriers.

According to the FSR, starting from October 12, 2023, enterprises involved in concentrations or public procurement in the EU that received foreign subsidies within the past three years and met the reporting thresholds must make a prior declaration to the EC. The regulation establishes a procedure involving two stages -- a preliminary review and an in-depth investigation. 

As of the end of November 2024, the EC has launched multiple investigations under the FSR framework, focusing on two primary types: notification-based and ex officio investigations. Regarding the notification-based probes, the EC has initiated three in-depth public procurement investigations, in which the investigated enterprises were all Chinese enterprises and their affiliates, and all three investigations resulted in the withdrawal of the investigated enterprises from bidding on the procurement projects, according to the MOFCOM.

With regard to ex officio investigations, the EC launched two probes, both of which focused on Chinese enterprises and their affiliates.

The Chinese investigative authorities gathered extensive feedback from stake-holders on the FSR investigations through the distribution of questionnaires and comment forms on the barrier investigation. All stakeholders who participated in the questionnaire noted unreasonable practices in the EU's FSR probes into Chinese enterprises, which violated the WTO's principles of non-discrimination.

Moreover, unreasonable practices, as perceived by the various stakeholders who participated in the questionnaire, included the reversal of the burden of proof, imposition of inappropriate penalties, non-transparency of the investigation process, unreasonable time frames, and a lack of procedural due diligence.

They believed that the FSR investigations negatively impact trade and investment by restricting the entry of Chinese enterprises' products, services and investments into the EU market, and the damage to the competitiveness of relevant Chinese enterprises and Chinese-made products in the EU market. In addition, they noted that the investigations could also harm the EU, its member states, and its consumers.

The MOFCOM said on Thursday that the investigation has been completed, and, based on the investigation's findings and relevant regulations, it has determined that the relevant practices of the EU are equal to placing trade and investment barriers on Chinese enterprises.


Global Times