Chinese businesses criticise EU’s ‘de-risking’ approach

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Despite assurances that the EU does not want to decouple its trade from China, Chinese companies operating in Europe say they are facing uncertainty regarding their future, but nevertheless continue to invest in the bloc.

Following increasing concerns over trade dependencies on third countries after the Russian aggression against Ukraine, EU Commission President Ursula von der Leyen in March said it was necessary for the EU to “de-risk” its relationship with China.

While this was said as a rejection to a full “decoupling” between the Chinese and Western economies, as debated notably in the US, it has nevertheless concerned Chinese companies operating in Europe, according to a survey conducted by the China Chamber of Commerce (CCCEU) and the business consultancy Roland Berger.

“Chinese enterprises are really concerned regarding the EU’s de-risking strategy and trade barriers, they believe that this initiative will harm China and the EU and impact global economy recovery,” Yang Xiaohong of Roland Berger said when presenting the survey results on Tuesday (14 November).

Of surveyed companies, 73% said that their operation was negatively affected by the “de-risking” approach. Nevertheless, 83% of the businesses report that they want to expand their presence in Europe, with a majority expecting revenue from existing operations to increase.

Increase market share of EU-made solar panels

Since the announcement of the “de-risking” paradigm, the European Commission has presented multiple policies aiming to reduce the dependence on China, notably on critical raw materials and products needed for the energy transition, such as solar panels and wind turbines.

While currently around 70% of solar PV modules worldwide are produced in China, the EU’s “Net-Zero Industry Act” proposes a target for the EU to produce 40% of the solar modules and other products needed for Europe to reach its climate objectives by itself in 2030.

For that purpose, the Commission proposed to allow EU countries to disadvantage China-made products in subsidy programs for renewable energy as well as in public procurement, as long as this does not lead to a cost increase of more than 10%.

The European Parliament’s Industry Committee went even further, by proposing to oblige EU countries to partly exclude China-made green technologies from public procurement and auctions for renewable energy.

In its proposed changes to the law, the Committee calls for a minimum share of 50% of green technologies originating in countries that have signed the World Trade Organisation’s Agreement on Government Procurement (GPA), which China has not.

For example, green technology bids using mostly solar panels that were made in China could not be bought in public procurement or supported by renewable energy subsidies awarded in auctions any more.

The Parliament’s position will be voted on in the plenary next week before it will be negotiated with the member states in the so-called trilogue negotiations.

Green industry: 'Buy less Chinese' instead of 'buy European'

Free trade advocates have shown relief over the European Commission’s proposal for a “Net-Zero Industry Act” as it does not contain a provision to favour European manufacturers over foreign ones, but only a much looser provision against dependency on China.

Investigation into Chinese electric vehicles

“When the EU seeks to reduce external reliance in the EU’s green sector and foster domestic green industries, barriers are put up in certain areas where Chinese enterprises have a competitive advantage,” Yang said, citing the EU’s investigation into Chinese electric vehicles as another example.

Chinese companies are “concerned that such measures would add uncertainties to their green plan and […] deteriorate their business plan,” according to the survey results, she added.

The investigation into Chinese electric vehicles (EVs) was announced by von der Leyen during her ‘State of the Union’ address in September, where she complained that global markets would be “flooded” with Chinese electric cars.

Their prices would be “kept artificially low by huge state subsidies”, von der Leyen said, announcing the investigation that could lead to new tariffs, so-called countervailing duties, to be put on Chinese EVs.

When presenting the survey, the CCCEU reiterated its criticism of the investigation.

“We don’t we don’t think the Chinese EV sector is a harm to the EU market,” Liang Linlin, Director of Communication and Research at the CCCEU said.

“We are highly complementary to each other,” she said, adding that “Chinese and European companies also have a very deepened cooperation in this regard.”