CCCEU Statement on EC's FSR in-depth probes into Chinese companies in Romanian solar plant project

April 22, 2024, Brussels

On April 22, 2024, China Chamber of Commerce to the EU (CCCEU) observed that the Official Journal of the EU published two summary notices pertaining to the 2nd and 3rd in-depth investigations under the Foreign Subsidies Regulation (FSR). The chamber restates its firm opposition to the European Commission's use of the FSR as a means to economically pressure Chinese companies operating in the EU, particularly in the green transition sector, with this new tool.

The chamber hereby emphasises that the FSR has raised grave concerns and introduced significant uncertainties to the business operations and development of European subsidiaries of Chinese companies, owing to the following three major reasons.

Firstly, the overly broad and non-exhaustive definition of "foreign financial contributions" in the FSR and its Implementing Regulation, which is short of clarification by the Commission, holds significant implications. It has the potential to greatly impact the computation of the amount of alleged foreign financial contributions and consequently the perceived extent of subsidies received by Chinese companies, thereby not only prompting investigations but also influencing the remedies and decisions that the Commission may enact. Additionally, the currently designed notification mechanism gives rise to the effect of shifting the burden of proof onto the Chinese companies to demonstrate they haven't received subsidies, whereas the EU investigating authority ought to have borne the duty to prove the existence of such subsidies in a due process. The EU's information request or notification procedure subject Chinese companies to "voluntarily" disclose "unlimited" information, often broad and vague, amounts to phishing expedition, casting a wide net of unjustified investigations.

Secondly, the Commission's broadens scrutiny of the possible impact of subsidies received by Chinese parent companies that were passed through onto their European entities, which should be treated equally as EU local companies. Under the FSR, the Commission not only scrutinizes "foreign financial contributions" received by the companies under investigation, but also those received by their parent companies and other affiliated companies under the control of the same parent companies located in third countries. This approach unwarrantedly amplifies the perceived extent of alleged "subsidies" under consideration.

Thirdly, the chamber and its members are in particular concerned on a significant lack of transparency, exacerbated by the discretionary power granted to the Commission under the FSR, which likely results in discriminatory treatment. For instance, both the second and third in-depth investigations relate to a solar plant project public tendering procedure in Romania. Insights come to our knowledge reveals that several other companies, neither EU nor Chinese, participated in the bidding process. The Commission's public communication has not disclosed this important factual background, or these other tenders has equally provided notification as required by FSR. Nor has the Commission offered any explanation or justification for its decision not to investigate these other tenders. This lack of transparency gives rise to serious  concerns that the Commission may be engaging in discriminatory practices against Chinese companies only. This cast grave doubt of the objectiveness of the Commission and the very purpose of FSR's enactment, in contradict to the non-discriminatory nature of FSR claimed by the Commission.

Furthermore, there are additional concerns, including the inadequate time provided for companies to compile the extensive and burdensome documentation requested by the Commission, whose failure to provide them on time will lead to obvious adverse consequences. Additionally, on numerous occasions, the Commission seeks confidential information or commercial contract details that are restricted from disclosure under specific circumstances. Given that companies may be unable to provide these documents, the Commission may proceed with the information available to it which is often unfavourable to the companies, exacerbating unfair treatment towards them.

We earnestly urge all stakeholders to promptly reassess the implementation of the FSR and its adverse effects on the EU's investment and public procurement sectors. The FSR has been weaponised by the EU side and functions as a form of economic coercion. The Chinese company subject to the first in-depth investigation under the FSR withdrew from the tender. Subsequent cases, particularly the second and third instances involving a solar project public procurement in Romania, further escalate uncertainties for Chinese bidders. As far as we know, the tender decision was initially scheduled to be released for May but the Commission's decision will become known as late as August, undoubtedly introducing significant uncertainties.

The FSR allows to pursue subsidies received by up to parent companies in home country. This approach inherently disadvantages European subsidiaries of Chinese investors, depriving them of equal treatment compared to local bidding enterprises. Such discriminatory practices against Chinese companies not only dampen their enthusiasm for EU tender participation but also engender a lose-lose scenario for both sides in terms of business collaboration, mergers and acquisitions (MA) and greenfield investments.

The chamber also highlights the potential conflict of laws posed by the FSR. The Commission's requests for confidential bidding information, including pricing details, from Chinese companies, as well as contracts containing sensitive business secrets potentially linked to subsidies, raise concerns about breaching tender regulations or Chinese laws. Moreover, the FSR's broad definition of subsidies leads to the Commission seeking information beyond what European subsidiaries of Chinese firms typically provide, exacerbating compliance conflicts with the legal obligations of non-EU companies in their home countries.

The chamber is closely monitoring the situation and will continue to engage with relevant stakeholders to express our significant concerns regarding the impact of the FSR and its implementation on the EU's business environment. We urge the EU to objectively recognise the contributions of Chinese companies to Europe's green transition and social development, and to ensure that Chinese enterprises are provided with a fair, just, and non-discriminatory environment in which to operate.