EU Updates its Report on China’s Distortions in Economy

The European Commission has updated its report on state-led distortions in the Chinese economy, adding new sectors and potentially opening the door to anti-dumping complaints from EU chip and clean-tech producers.
The update, published on Wednesday and stretching to 712 pages, adds details of what the EU executive considers to be distortions in sectors of telecom equipment, semiconductors, the rail industry, renewable energy and electric vehicles.
It retains the steel, aluminum, chemicals and ceramics sectors of the initial report in 2017. There is no similar EU report for any other country.
The report is a tool for EU industries to use when filing complaints about dumping practices. If Chinese prices and costs are found to be distorted, they can be replaced with those from another country to calculate normally higher dumping tariffs.
“This could be taken as an invitation to sectors that have not yet brought anti-dumping complaints to explore their use,” said Laurent Ruessmann, partner at trade law firm Ruessmann Beck & Co.
The Commission has typically launched about 10 anti-dumping investigations per year, many concerning steel products.
It is now looking to shield EU firms from cheap clean-tech products, with a review of subsidies received by Chinese wind turbine suppliers and an anti-subsidy investigation into imports of Chinese electric vehicles.
The report, however, will not play a part in these investigations as it only concerns dumping.
The report covers the role of the Chinese state in planning to meet economic objectives, the importance of state-owned enterprises, preferential access to land, labor, raw materials and energy and state support for specific sectors.
In most sectors, including electric vehicles, it refers to Chinese overcapacity.
China's parliament, the National People's Congress, said in March the government would take steps to curb overcapacity. Beijing argues the recent US and EU focus on risks from China's excess capacity is misguided. Its state media has denounced these concerns as part of an effort to limit China's rise.
On Wednesday, China said it was concerned by what it called discriminatory measures by the EU against its firms after the bloc said it would investigate subsidies received by Chinese suppliers of wind turbines destined for its countries.
“The outside world is worried about the rising tendency of protectionism in the EU,” foreign ministry spokesperson Mao Ning said at a regular press briefing on Wednesday.
“China is highly concerned about the discriminatory measures taken by the European Union against Chinese companies and even industries,” Mao said, adding that the bloc should abide by World Trade Organization rules and market principles.
Meanwhile the EU's anti-trust commissioner Margrethe Vestager has said the European Commission will look into conditions for the development of wind parks in Spain, Greece, France, Romania and Bulgaria.
“Today, we are launching a new inquiry into Chinese suppliers of wind turbines,” Vestager said in a speech at Princeton University, in the US state of New Jersey.
“We are investigating the conditions for the development of wind parks in Spain, Greece, France, Romania and Bulgaria,” she added.
For her part, a European Commission spokeswoman told the German News Agency that the EU investigations relate to suspicions that some wind turbine makers may benefit from an unfair competitive advantage as a result of foreign support.
In her speech to the Institute for Advanced Study in Princeton, Vestager said: “China is for us simultaneously a partner in fighting climate change, an economic competitor, a systemic rival. And the last two dimensions are increasingly converging.”
Vestager said China's “playbook” of subsidizing domestic solar panel suppliers and exporting excess capacity at low prices had resulted in fewer than 3% of solar panels installed in the EU being produced in Europe.
Research service BloombergNEF said prices for Chinese turbines are around 20% below rival US and European products.
The EU imported some $1.42 billion in turbines and components from China last year, customs data showed.
In a related development, a survey released by the German Chamber of Commerce in China has found that nearly two-thirds of German firms feel they encounter unfair competition from local firms in China and are outgunned in terms of access to local officials, information and licenses.
The survey came a few days ahead of Chancellor Olaf Scholz’ visit to China for talks with Chinese President Xi and other senior officials.
It showed that 150 companies surveyed from February 22 to March 6 said they face “unfair competition” operating in China, Germany’s largest trading partner.
Over 52% of those surveyed said their primary competitors were private Chinese companies.
Wednesday's survey also showed that 95% of German firms felt that increased competition from Chinese companies was affecting their business, including 70% who felt it was eating into their market share.
Scholz’s trip will be his second to China as chancellor, following his first visit in November 2022.

US President Donald Trump's administration is considering a plan to stop and inspect Iranian oil tankers at sea under an international accord aimed at countering the spread of weapons of mass destruction, sources familiar with the matter told Reuters.

Trump has vowed to restore a "maximum pressure" campaign to isolate Iran from the global economy and drive its oil exports to zero, in order to stop the country from obtaining a nuclear weapon.

Trump hit Iran with two waves of fresh sanctions in the first weeks of his second-term, targeting companies and the so-called shadow fleet of ageing oil tankers that sail without Western insurance and transport crude from sanctioned countries.

Those moves have largely been in line with the limited measures implemented during former President Joe Biden's administration, during which Iran succeeded in ramping up oil exports through complex smuggling networks.

Trump officials are now looking at ways for allied countries to stop and inspect ships sailing through critical chokepoints such as the Malacca Strait in Asia and other sea lanes, according to six sources who asked not to be named due to the sensitive subject.

That would delay delivery of crude to refiners. It could also expose parties involved in facilitating the trade to reputational damage and sanctions, the sources said.

"You don’t have to sink ships or arrest people to have that chilling effect that this is just not worth the risk," one of the sources said.

"The delay in delivery ... instills uncertainty in that illicit trade network."

The administration was examining whether inspections at sea could be conducted under the auspices of the Proliferation Security Initiative launched in 2003, which aims to prevent the trafficking of weapons of mass destruction.

The US drove that initiative, which has been signed by over 100 governments.

This mechanism could enable foreign governments to target Iran's oil shipments at Washington's request, one of the sources said, effectively delaying deliveries and hitting supply chains Tehran relies upon for revenue.

The National Security Council, which formulates policy in the White House, was looking into possible inspections at sea, two of the sources said.

It was unclear if Washington had yet approached any signatories to the Proliferation Security Initiative to test their willingness to cooperate with the proposal.

John Bolton, who was the US lead negotiator for the initiative when it was formed, told Reuters: "it would be fully justified" to use the initiative to slow down Iran oil exports. He noted that selling oil was "obviously critical to raise revenue for the government of Iran to conduct both its proliferation activities and support for terrorism."

Iranian President Masoud Pezeshkian told Iran's parliament on March 2 that Trump "has once again signed an order sanctioning many of our ships at sea, leaving them uncertain about how to unload their oil and gas cargo". He was referring to Trump's latest round of sanctions.

EU Updates its Report on China’s Distortions in Economy