The EU promises to confront China over “heavy” subsidies to its industries

Europe must do more to resist “massive” hidden handouts being handed out by China to its industry, the European Commission President said, as the EU rushes to counter a raft of global subsidies that threaten its competitiveness.

After European leaders debated how to respond to US President Joe Biden’s $369 billion climate law courting green companies, Ursula von der Leyen said the EU must also do more to deal with Beijing’s Support for their domestic industry to cope.

“As for China, we know they give massive subsidies, not only [to] the clean tech sector, but in general,” said von der Leyen in a press conference following a summit of EU leaders. “So the topic is much broader than our focus [Biden’s Inflation Reduction Act]. So we are developing a much more comprehensive strategy to deal with it.”

Biden’s legislation, which includes subsidies and tax breaks for green tech, has unnerved EU leaders who fear it will lure companies across the Atlantic.

“Faced with the new geopolitical reality, the European Union will act decisively to ensure its long-term competitiveness, prosperity and role on the global stage,” EU leaders agreed in a joint statement on Friday morning.

Von der Leyen said the IRA is “clearly defined and targeted at six clean tech sectors,” meaning the EU sees it as “very open and transparent” about dealing with it.

She said the situation in China is far more opaque with “hidden subsidies” and a broader range of sectors affected. European companies have struggled to enter the Chinese market and complained about non-compliance with intellectual property rights, she said.

A spokesman for the Chinese embassy in Brussels said what they said was “just plain wrong” and that his country’s subsidies were in line with World Trade Organization rules. “We hope that in the spirit of maintaining an open, fair, just and non-discriminatory international business and trade environment, relevant actions by the European side could also comply with WTO rules.”

French President Emmanuel Macron said the EU must “react with great force” to the IRA and said European state aid is needed “to support our strategic sectors at the right level and in particular to counter the risks of relocation”.

He begged the bloc to respond to “unfair competition” with “speed.”

EU leaders agreed on “simpler, faster and more predictable” state aid procedures, including through tax credits, as well as using EU funds for green technologies and “simplified and accelerated” rules for climate-friendly investments.

The EU has long complained about government support for China’s green industries, including photovoltaic solar panel manufacturing. Brussels imposed anti-dumping duties on Beijing in 2013 for allegedly receiving unfair subsidies from Chinese manufacturers. The EU recently passed new rules allowing it to investigate foreign companies benefiting from state funds.

Another threat is Chinese electric vehicles, which are gaining more and more market share in the European market.

After the summit, German Chancellor Olaf Scholz said the EU had a long-standing policy to counter Chinese subsidies and “some ways to react”.

He added: “It’s not helping the world when everyone is working on subsidies and trying to distort competition.”

Dutch Prime Minister Mark Rutte, who opposes raising new EU funds to support industry, said the bigger problem is cutting red tape to get companies money.

“My country is investing €60 billion in cleaning up our economy by 2035, and we only make up 6 percent of the European economy,” he said.

“So it’s not that Europe isn’t strengthening. The problem is allowing – how do you get your money where it needs to go as quickly as possible with the least amount of fuss?”

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Adam Bradshaw

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