China warns of impact of subsidies probe on relations with EU

The Chinese government warned this Thursday of a “negative impact” on relations between China and the European Union caused by an investigation launched into subsidies provided to Chinese electric vehicle manufacturers, which European authorities consider to give rise to unfair competition.

The measure, “taken in the name of ‘fair competition,'” is “overtly protectionist” and “will have a negative impact on economic and trade relations between China and the European Union,” a Chinese Foreign Ministry spokesman warned. , at a press conference.

European Commission President Ursula von der Leyen announced on Wednesday an investigation into the subsidies China provides to its electric vehicle makers whose prices are “artificially low” because of public support that results in losses. to European companies.

“Global markets are flooded with cheaper Chinese electric vehicles, and their prices are kept artificially low by huge government subsidies,” von der Leyen explained in his speech at the Congress.

European Commission Vice-President Valdis Dombrovskis, who is responsible for trade, announced on the same day that he would travel to China next week to discuss the issue of subsidies for electric vehicles.

In recent months, France in particular has defended a more assertive Europe in the face of Chinese actions.

Other European Union member states, including Germany, whose main auto industry market is in China, are concerned about deteriorating relations with Beijing.

European companies “often lose out on prices to competitors who benefit from huge government subsidies. We cannot forget how badly our solar panel industry has suffered from China’s unfair trade practices,” said the President of the European Commission.

Chinese diplomats stressed that the country’s competitive advantage was “achieved through hard work” and was “the result of continuous technological innovation.”

China’s electric vehicle exports more than doubled (+110%) between January and August, according to data from the China Association of Automobile Manufacturers (CAAM) released on Wednesday.

Almost six million electric vehicles were sold in China last year, more than all other countries in the world combined.

The size of the Chinese market has led to the rise of local brands, including BYD, NIO or Xpeng, that are now threatening the “status quo” of an industry that has been dominated for decades by German, Japanese and North American construction companies.

Five of the ten best-selling electric vehicle brands in the world are now Chinese. The largest of them is BYD, second only to North American Tesla. Chinese dominance extends to the battery industry. Chinese CATL and BYD are the largest manufacturers in the world. Beijing still maintains strict controls over access to vital raw materials, including rare earth elements.

Still unknown to most of the European public, Chinese brands were present in large numbers at the Munich Motor Show in Germany earlier this month.

Chinese automakers have been waging a price war in recent months, while the Chinese are cutting costs due to the country’s slowing economy, putting even more pressure on European brands.