China slams EU foreign subsidies rules, links them to trade talks

BRUSSELS — China has dragged the EU’s foreign subsidies rules into its wider trade dispute with Brussels, just as the two sides enter a crucial stretch of negotiations. Beijing’s Ministry of Justice has ordered Chinese companies not to hand over information to EU officials in investigations under the FSR — the bloc’s tool to ensure that players in the single market don’t receive unfair support from abroad. The notice explicitly mentioned the European Commission’s in-depth probe into JD.com, the Chinese e-commerce giant that is trying to acquire Germany’s Ceconomy, the parent company of consumer electronics retailer MediaMarkt, in a €2 billion deal. The move appears aimed at adding pressure on Brussels midway through a renewed trade dialogue between the EU and China, with negotiators engaged in intense closed-door discussions over how to narrow the EU’s €1 billion-a-day trade deficit in goods with China. The Commission is expected to hold a videoconference with the Chinese Ministry of Commerce in September that would pave the way for a trip by trade chief Maroš Šefčovič to Beijing in early October. The Commission will debrief EU leaders at a summit a few days later. That could be a make-or-break moment for the bloc to decide whether constructive engagement is enough to rebalance the trading relationship — or whether Brussels needs to defend Europe’s trade interests more forcefully. “China has consistently opposed the EU’s abuse of unilateral tools such as the Foreign Subsidies Regulation (FSR) to suppress Chinese companies,” a spokesperson for China’s Ministry of Commerce told reporters on Thursday. “I would like to emphasize that China and the EU have established a Trade and Investment Consultation (TIC) mechanism and reached a consensus on managing differences through dialogue and consultation,” the spokesperson added. “We hope the EU will work with China to promptly correct its erroneous practices in the FSR investigation and strengthen communication through intergovernmental dialogue. China will closely monitor the EU’s actions and will take necessary measures to resolutely safeguard national security and the legitimate rights and interests of enterprises.” No discrimination The Commission maintains that the FSR does not discriminate against companies on the basis of where they’re headquartered. “The FSR is completely, fully compliant with WTO rules as it applies to all companies irrespective of their nationality, and its objective is to ensure that all companies doing business in the EU, including Chinese ones, are treated equally and compete on an equal footing,” spokesperson Ricardo Cardoso told reporters in Brussels on Thursday. According to Beijing, the EU is requesting too much information as it investigates whether JD.com’s deal is unfairly backed by Chinese state support. “In the JD.com case, the EU has again arbitrarily and unreasonably demanded a wide range of information from relevant Chinese banks that is irrelevant to the investigation,” the Ministry of Commerce spokesperson said. The Commission worries that JD.com may be benefiting from unfair advantages in the form of preferential financing, tax incentives and grants provided by the Chinese government that could give it a competitive edge in the EU market once the transaction is finalized. JD.com offered remedies this week to address the Commission’s concerns, in what is typically a sign that talks are at an advanced stage. The company declined to comment. Beijing’s intervention could even jeopardize the acquisition, according to Dirk Gotink, a center-right Dutch MEP and a member of the European Parliament’s International Trade Committee who is closely following the case. “They’re being taken hostage by a political process,” he said, calling Beijing’s move “a unilateral escalation.” Camille Gijs contributed reporting. This article has been updated.