The Ministry of Commerce of China announced on the morning of the 9th that the European Union's investigation of Chinese enterprises based on the "Foreign Subsidy Regulation" (FSR) and its implementation rules constitutes trade and investment barriers.
On the 9th, the Ministry of Commerce of China issued an announcement titled "Final Conclusion on the Trade and Investment Barrier Investigation Related to the EU's 'Foreign Subsidy Regulation'."
The Ministry of Commerce of China pointed out that, in response to the application of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, and in accordance with the relevant provisions of the "Foreign Trade Law of the People's Republic of China" and the "Rules for the Investigation of Foreign Trade Barriers," the Ministry released Announcement No. 28 of 2024 on July 10, 2024, deciding to conduct a trade and investment barrier investigation into the relevant practices taken by the EU in investigating Chinese enterprises based on the "Foreign Subsidy Regulation" and its implementation rules.
The investigation shows that as of the end of November 2024, the European Commission has initiated multiple investigations based on FSR related rules, with the main types of investigations including investigations upon declaration and investigations upon authority. Regarding investigations upon declaration, the European Commission initiated three in-depth investigations involving the public procurement field, all of which involved Chinese enterprises and their affiliated companies, and all three ended with the withdrawal of the investigated enterprises from bidding for relevant procurement projects.
The investigation indicates that, according to information on the European Commission's website, there are currently 13 reviews involving the field of operator concentration, from which the limited information on this website cannot confirm whether Chinese enterprises are involved. Regarding investigations upon authority, the European Commission initiated two investigations, all targeting Chinese enterprises and their affiliated companies.
The investigation report indicates that applicants claim that since the FSR rules took effect, the first five investigations by the European Commission have all targeted Chinese enterprises and their affiliated companies, with clear objectives and ambiguous filing standards, and the specific filing procedures have not been disclosed to relevant stakeholders.
The investigation report also mentions that the applicants believe the standard for recognizing "foreign subsidies" in an FSR investigation is vague; the scope of the investigation is extensive, causing a significant burden to enterprises; the investigation procedures are not open or transparent, resulting in tremendous uncertainty for enterprises participating in an FSR investigation; enforcement measures such as surprise inspections taken during the investigation exceed necessary limits; and subjective arbitrariness in key determinations such as "market distortion"; the unreasonable practices during the investigation, combined with the reversal of the burden of proof and severe penalties, create immense pressure on Chinese enterprises to participate in the investigation.
The Ministry of Commerce of China stated that the investigation is now concluded, and based on the investigation results and Article 31 of the "Rules for the Investigation of Foreign Trade Barriers," the Ministry determines that the relevant practices taken by the EU in investigating Chinese enterprises based on the "Foreign Subsidy Regulation" and its implementation rules constitute circumstances specified in Article 3 of the "Rules for the Investigation of Foreign Trade Barriers," constituting trade and investment barriers.