Exclusive disclosure: Strong dissatisfaction in the Chinese industry! China may take action against EU automobiles, brandy, and more

On June 12, the European Commission released its preliminary ruling on the anti-subsidy investigation of electric vehicles from China, proposing to impose temporary anti-subsidy duties on imported electric vehicles from China.

Tan Zhu learned that after the EU released the preliminary ruling, the Chinese industry was very dissatisfied and strongly urged relevant departments to take retaliatory measures against the EU.

According to industry insiders, China is internally advancing the relevant procedures to increase the provisional import tariffs on large-displacement gasoline vehicles.

In addition, earlier this year, the Ministry of Commerce issued a notice to initiate an anti-dumping investigation on imported brandies originating from the EU. According to industry experts familiar with the brandy anti-dumping investigation, the preliminary ruling of this case is expected to be announced by the end of August.

In response to the EU's stance, officials from the Ministry of Foreign Affairs, the National Development and Reform Commission, and the Ministry of Commerce stated that China will closely monitor the EU's follow-up progress and will resolutely take all necessary measures to defend the legitimate rights and interests of Chinese enterprises.

How to understand China's strong opposition and retaliatory measures? Tan Zhu found Chinese participants involved in responding to this investigation, as well as lawyers and experts in international trade and economics, and had a chat with them.

The Chinese industry's "strong opposition" has clear and sufficient legal basis. Looking back at the so-called investigation by the EU, from the initiation of the investigation, to the investigation process, and then to the preliminary ruling, each step reveals one word:

Unreasonable.

Let's break it down step by step.

First, the initiation. This anti-subsidy investigation was initiated by the European Commission on its own initiative, rather than at the request of relevant industries in the EU.

What's the difference between an industry-initiated investigation and one initiated by the European Commission?

The China Chamber of Commerce for Import and Export of Machinery and Electronic Products is the industry respondent in this investigation, and Sun Xiaohong, as the Secretary-General of the Automotive Internationalization Committee of the Chamber, is very familiar with the situation of this investigation. He stated that anti-subsidy investigations are usually initiated by the industry. This is because only the industry can directly feel the threat posed by products with strong competitiveness from another country, and from the perspective of protecting their own interests, they request the investigation and initiate a substantiated investigation.

So, what was the reason for the European Commission to initiate this investigation? It was the European Commission's subjective judgment that the Chinese electric vehicle industry posed a "threat."

Sun Xiaohong mentioned that historically, the European Commission has almost no precedent for initiating anti-subsidy investigations on its own.

In the subsequent investigation process, there were also many unreasonable aspects.

The China Chamber of Commerce for Import and Export of Machinery and Electronic Products used three words to describe this investigation — lack of impartiality, objectivity, and transparency. First of all, the unfairness of the sampling.

The three companies selected by the European Commission are SAIC, Geely, and BYD. Why these three were chosen, the European Commission did not provide a convincing reason.

Hao Jie, a researcher at the Institute of Foreign Economic Studies of the National Development and Reform Commission, said, to achieve preset goals, the European Commission constructed and exaggerated the so-called "subsidy" project, disregarding WTO rules, abandoning the representative standard of the largest export volume, excluding leading European and American companies in the sampling, and only selecting Chinese local companies. The sampling criteria are non-compliant, the process is opaque, and the results are unfair.

According to relevant data, Chinese brands hold approximately 8% of the market share in the European electric vehicle market, and the proportion of these three companies will be even smaller.

Where does the "threat" in the mouth of the European Commission come from, we do not know.

In the face of such a "threat," the European Commission's request for information from Chinese electric vehicle companies is excessively harsh.

The three Chinese companies sampled have more than 200 affiliated companies required to submit questionnaires, and have responded to over 100 supplementary questionnaires, cooperating with the European Commission in on-site inspections for several months. Both the time and the sample size, in Sun Xiaohong's impression, are rarely seen in history.

From the disclosed preliminary ruling, the tax rates imposed by the European Commission on the three Chinese car companies range from 17.4% to 38.1%, a significant difference for which the European Commission has not yet provided an explanation.

Sun Xiaohong told Tan Zhu, Chinese companies reflected that the European side in the investigation requested them to provide the battery formula.

From what he knows, many of the information requested by the European Commission from Chinese companies involve enterprise privacy, business secrets, core technology, and other information or data.

These are the core competitiveness of the Chinese electric vehicle industry. Unable to compete with Chinese electric vehicles in the EU electric vehicle market, does the European Commission want to obtain them through robbery?

Sun Xiaohong stated that even more opaque and unreasonable is that the EU also uses data collected by themselves to supplement the data they cannot obtain. As for whether these data are objective and true, it is not their concern.

Throughout the entire investigation process, in the face of China's defense, the European Commission has never provided a substantive response.

Sun Xiaohong stated that during multiple rounds of investigations and hearings, China's position and concerns were never considered by the European Commission. They seem to not value communication, with their attention always focused on completing the investigation and doing what they want to do.

Facing such an investigation, China also described it in one sentence:

It is blatant protectionism, it creates and escalates trade frictions, it uses the name of "maintaining fair competition" to carry out the reality of "destroying fair competition," it is the greatest "unfairness."

Faced with such actions, China naturally has to take measures and countermeasures.

In fact, this is not the first time China has faced anti-subsidy investigations from Europe.

According to professional organizations, since the first anti-subsidy investigation initiated by the EU against China in 2010, to date, the EU has initiated more than ten anti-subsidy investigations against China.

Among them, the most well-known is the EU's anti-subsidy and anti-dumping investigations against the Chinese photovoltaic industry China's photovoltaic manufacturing companies mainly rely on exports, with Europe being the primary export market at that time.

In this situation, the European Union planned to impose a 47.6% tariff on China in the preliminary ruling, undoubtedly aiming to shut out China's photovoltaic industry.

After the news was released, China and the EU engaged in multiple rounds of government-to-government negotiations. Ultimately, the EU terminated its actions to impose tariffs.

The Chinese government will firmly defend the legitimate rights and interests of Chinese enterprises. For Chinese companies, if the actions of the European side harm their interests, Chinese companies will also voice out to defend their own rights.

According to industry insiders, China is internally advancing the relevant procedures to increase the provisional tariff on imported large-displacement gasoline vehicles.

Not long ago, industry insiders in the Chinese automotive industry have been calling for an increase in the provisional tariff on imported large-displacement vehicles to promote the achievement of the "dual-carbon" goals.

Large-displacement vehicles refer to gasoline vehicles with an engine displacement greater than 2.5 liters.

The China Association of Automobile Manufacturers specifically calculated that currently, the total amount of passenger cars with a displacement of over 2.5 liters exported from Europe to China each year has reached $18 billion. This figure is higher than the amount of electric vehicles exported from China to Europe in 2023.

If China raises the temporary tariff rate, European brands such as BMW and Mercedes-Benz will be the first to be impacted, which also means that European exports of automobiles to China will suffer a blow.

Cui Fan, an international trade expert at the University of International Business and Economics, told Tan Zhu that the industry is calling for China to increase the import tariff on large-displacement vehicles to 25%. If China takes such action, it is within the scope of China's commitments to the World Trade Organization and fully complies with WTO rules.

In addition to the automotive industry, Tan Zhu learned that China is expected to announce a preliminary ruling on anti-dumping investigations related to imported brandies from the European Union by the end of August.

Last year, the China Alcoholic Drinks Association formally submitted an anti-dumping investigation application to the Ministry of Commerce on behalf of the domestic brandy industry, and the Ministry of Commerce initiated an investigation in January this year.

The importance of the Chinese market to the European brandy industry can be illustrated by one piece of data:

Customs data shows that while European brandy sales have significantly declined in other global markets, the Chinese market has become a key support for its sales. From January to September last year, EU exports of brandy to China grew by more than one-fifth year-on-year.

Cui Fan stated that both China and the EU are members of the World Trade Organization and participants in the Multilateral Interim Appeal Arbitration Arrangement, and they can also conduct litigation and defense through the dispute settlement mechanism within the WTO framework to address issues.

In other words, from the EU's announcement of the preliminary ruling to the final ruling, China has many tools and means at its disposal.

Zhang Monan, an expert from the China Center for International Economic Exchanges, has just completed her visit to Europe. She told Tan Zhu that during her trip, she also discussed the issue of anti-subsidy with government officials from Germany, Belgium, and other countries. From her observations, European countries are more concerned about China's retaliatory measures after imposing tariffs on China.

Zhang Monan stated that the current situation is only the disclosure of the preliminary ruling, and there is a reservation period before the temporary tariffs are imposed starting on July 4, allowing Chinese companies and EU member states to raise objections If most EU countries object, these tariffs will not be implemented.

Now, there is still some time before a decision is made. It's better late than never, which also means that the EU still has a chance to get back on the right track.

What is the right track, within the EU, is not unclear.

One notable detail is that after the news of the European Commission's decision to impose temporary anti-subsidy duties on electric cars imported from China, countries like Germany, Hungary, and Sweden, which are at the forefront of cooperation with China in the field of new energy vehicles within the EU, immediately came out in opposition.

These countries are precisely the ones leading the way in cooperation with China in the field of new energy vehicles within the EU.

What is the practice that aligns with the interests of these countries can be seen from the statement of the Chairman of the German carmaker BMW Group, Zipse.

Zipse stated that imposing tariffs will hinder the development of European carmakers and also harm Europe's own interests. Trade protectionism will inevitably trigger a chain reaction - responding to tariffs with tariffs, replacing cooperation with isolation.

The reason why European carmakers are deeply concerned about the European Commission's decision to impose tariffs has an undeniable background:

Wei Qijia, a researcher at the National Information Center of the National Development and Reform Commission, pointed out that in recent years, EU companies such as BMW, Volkswagen, and Faurecia have been continuously increasing their investments in new energy vehicle businesses in China, obtaining key technologies such as batteries and intelligence. Chinese companies such as CATL, Nio, and BYD have also established factories in Germany and Hungary, helping to enhance the competitiveness of the EU's electric vehicle industry.

In the era of globalization, only by leveraging comparative advantages can countries achieve better development. While there is competition in the automotive industry between China and Europe, there is also cooperation.

The win-win situation under cooperation is not only reflected in the automotive industry - strengthening cooperation with China in the field of new energy vehicles is also beneficial for Europe to address climate change and the green transformation of the economy.

According to data from the European Transport and Environment Association, in 2023, 19.5% (about 300,000 vehicles) of electric vehicles sold in Europe are from China. Based on an estimated reduction of about 1.66 tons of carbon dioxide per electric vehicle per year, this is equivalent to a reduction of 498,000 tons of carbon dioxide per year.

The EU has always prided itself as a "pioneer" in global green transformation. The European Commission's decision to impose tariffs on Chinese electric vehicles will not only hinder the pace of its automotive industry transformation but also damage its image as a "pioneer" in green transformation.

In fact, even European media themselves are saying that while the EU is urging consumers to switch to electric vehicles, it is also trying to block the supply of high-performance electric vehicles, which is absurd.

An official from the National Development and Reform Commission stated, "When we work together, both benefit; when we fight, both suffer. The automotive industries of China and Europe are highly complementary, and cooperation between the two sides has a foundation, space, and prospects. China actively supports fair competition in the automotive industry of all countries, maintains the stability of the global automotive industry supply chain. However, if the EU disregards the calls of its industry, basic market rules, and WTO rules, and insists on imposing tariffs on Chinese electric vehicles, destroying the foundation of China-EU automotive industry cooperation, China will take all necessary measures to safeguard the legitimate rights of Chinese companies."

The EU still has time to think about whether to choose a win-win situation or to harm others without benefiting itself Author: Tan Zhu, Source: Yuyuan Tan Tian, Original Title: "Exclusive Disclosure: Strong Dissatisfaction in the Chinese Industry! China Can Take Action Against EU Cars, Brandy, etc."