Editor's Note: Greetings! With the European Parliament election just a week away, here's an important update: Brussels has reportedly decided to postpone its decision on tariffs concerning Chinese electric vehicles until after the June 9th election. In response, China urges the EC to stop its investigation, condemning it as protectionist. Stay informed about the latest in China-EU dynamics with our CCCEU Weekly Update. Enjoy your reading, and have a fantastic weekend!    

Focus

The European Commission will delay its decision on the anti-subsidy investigation into China's electric vehicles until after the EU elections from June 6 to 9. It is reported that this move aims to avoid sparking more political controversy and election volatility during the campaign period.

The EU launched its anti-subsidy inquiry into Chinese electric vehicles in October 2023, alleging that the Chinese government's subsidies to domestic electric vehicle producers were unfair, leading to distorted competition in the EU market. Notably, this investigation didn't stem from complaints by European manufacturers, which typically necessitate substantial grievances from the bloc's industries.

The EU's decision on the matter, originally expected on June 5, 2024, might be delayed until June 10, as per reports from media outlets. This postponement aims to steer clear of controversy amid the heightened political atmosphere surrounding the elections. A provisional announcement regarding tariffs is anticipated for July. Following this, EU member states will have four months to deliberate on the imposition of permanent measures on imports of Chinese electric vehicles.

In response to the reported postponement, China on Thursday called on the EU to terminate the investigation as soon as possible "so as to avoid harming overall bilateral cooperation."

"Let me just say that the nature of the investigation is protectionist," the Ministry's spokeswoman, Mao Ning, told a regular afternoon press conference.

"There are many practices in the investigation that are simply unjustifiable and inconsistent with the rules, and the EU's accusation of China's so-called subsidization is untenable," she noted.

"China urges the EU to stop the investigation as soon as possible so as not to disrupt China-EU economic and trade cooperation and the stability of industrial and supply chains," Mao told reporters.

"If the EU insists on continuing with the investigation, China will not sit back and watch. We will take every necessary measure to firmly safeguard our lawful rights and interests," she said.

Ms. Mao's remarks could further add to the heat felt in Brussels. Many observers are closely monitoring reports that Chinese industries are compiling evidence of the EU's alleged dumping of certain pork products. Additionally, there's the looming threat of tariff increases of up to 25% on Europe's large-engine cars into China, coinciding with an ongoing anti-dumping investigation into European brandy.

EU capitals seem to be, and rightfully should be, concerned about the situation. German Transport Minister Volker Wissing expressed his worries this week, likening the investigation to the East German era and criticizing the European Commission's approach as inconsistent with market economy principles. French Finance Minister Bruno Le Maire echoed these sentiments, emphasizing the importance of avoiding any form of trade war, as it is not in the interest of any country.

Amidst these intricate circumstances, the EU elections are just a week away. Analysts emphasize the significance of these elections for China, particularly as the European Commission has adopted a progressively confrontational stance towards China in recent years. With economic security concerns taking center stage, the trajectory of EU policy towards China has now become a focal point of interest.

During a recent debate organized by Bruegel and the Financial Times, EC President Von der Leyen, who is seeking re-election, maintained that the EU is not engaged in a trade war with China. However, other candidates characterized the situation as "the start of a war, or at the very least, a risk of escalation."

According to some experts, the outcome of the European Parliament elections might dilute the EU's tough stance on China, possibly resulting in a shift towards a more moderate policy in the future. Nevertheless, other European analysts contend that the electric car investigation marks just the beginning of the EU's protectionist trajectory.

The upcoming EU elections next week are anticipated to exert a subtle yet significant influence on the development of economic and trade relations between China and Europe. European public opinion increasingly acknowledges that China's influence within the EU cannot be overlooked.

Over time, changes in the EU's internal political landscape are likely to influence the coherence and stability of its foreign policy. With Europe's political landscape in flux, the outlook for the EU's policy towards China is multifaceted and complex. In this uncertain environment, it's crucial for Chinese enterprises to carefully assess and adjust their investment and operational strategies in the EU market to navigate the evolving international landscape with confidence.

Hot Topics

China sets up the third fund with $47.5 billion to boost semiconductor sector

According to Reuters, China has set up its third planned state-backed investment fund to boost its semiconductor industry, with a registered capital of 344 billion yuan ($47.5 billion), according to a filing with a government-run companies registry.

The hundreds of billions of yuan invested in the sector went into China's drive to achieve self-sufficiency in semiconductors. That commitment has taken on renewed urgency after the U.S. imposed a series of export control measures over the last couple of years.

TikTok pauses e-commerce push into Europe to focus on the US

According to Bloomberg's report on Friday, TikTok has put on hold plans to launch its fast-growing e-commerce business across major European markets, focusing instead on growth in the US, where it's fighting a divest-or-ban law.

Byte Dance's social media startup has put on hold a rollout of its shopping platform across Spain, Germany, Italy, France, and Ireland that was to take place as soon as July, according to people familiar with the matter. It also iced plans to bring the Shop feature to Mexico and Brazil, one of the people was quoted as saying.

IMF upgrades China's GDP growth forecasts

According to Reuters, the IMF has upgraded its forecast for China's economic growth! 2024 GDP growth is now 5% (up from 4.6%), and 2025 is 4.5% (up from 4.1%). Driven by strong Q1 growth & policy initiatives, Beijing's eased monetary policy aims to tackle the property slump.

EU-China Non-Proliferation and Disarmament Dialogue takes place in Beijing

On 30 May, the EU-China Non-Proliferation and Disarmament Dialogue took place in Beijing. The EU Special Envoy for Non-proliferation and Disarmament and Special Adviser on Iran Nuclear Issue, Ambassador Stephan Klement and the Director General of Arms Control of China's Ministry of Foreign Affairs held a constructive and frank exchange on many important current issues. During the meeting, discussions touched upon the Russian aggression in Ukraine, North Korea, Iran, Artificial Intelligence, the Review Process of the Treaty on the Non-Proliferation of nuclear weapons, among others.

Geely and Renault Group and announce the creation of a leading Powertrain Technology Company "HORSE Powertrain Limited"

On May 31, Geely Group and Renault Group announced the creation of a leading powertrain technology company, HORSE Powertrain Limited. The new company will lead the hybrid and combustion powertrain components and systems markets.

China Eastern Airlines gets another C919 aircraft

According to Xinhua, the sixth C919 jetliner joined the China Eastern Airlines fleet on Tuesday, indicating the acceleration of commercial operation of China's homegrown large passenger aircraft. This came one year after the first commercial flight of the C919 was made.

The aircraft, delivered to China Eastern on Monday, landed at Shanghai Hongqiao International Airport on Tuesday morning after a short flight from Shanghai Pudong International Airport. C919 was developed by Commercial Aircraft Corporation of China, Ltd. (COMAC).

Google, Amazon and Airbnb backed by EU in Italy information dispute

According to Reuters, Google, Amazon, and Airbnb have received backing from the European Union's Court of Justice (CJEU) over a dispute about Italian regulations. The Italian government adopted a regulation in 2020 that required tech companies operating within Italy to provide information about their businesses and pay a financial contribution to the government. Google, Amazon, and Airbnb challenged the regulation under the argument that it contradicted existing EU law that stated companies were only required to follow the regulations of countries where they are physically based.

Google and Airbnb's EU offices are located in Ireland, while Amazon's EU office is based in Luxembourg.

What are experts talking about?

China's New Energy Vehicles: "Overcapacity"? "Undercapacity" is Closer to the Truth

Source: China Watch

Author(s): Warwick Powell

China has established itself as a global leader in the design and manufacture of new energy vehicles, including electric vehicles (EV). In the past four years, China's new-energy carmakers have taken the world by storm - with production surging from 350,000 units in 2020 to 9.6 million by 2023. Automotive brands such as BYD, previously known only to the Chinese, are rapidly becoming internationally recognised. In addition, the transition to EV  has become a key part of the drive for a low-carbon global economy, which is crucial to achieving the global emissions reduction targets set in "The Paris Agreement."

It would therefore seem logical that China's ability to offer electric vehicles to the world market at a lower cost should be welcomed globally. However, in recent months, a succession of US and European politicians have expressed concern about China's 'overcapacity' in new-energy vehicles, condemning China for 'dumping exports at low prices' and threatening to impose bans and high tariffs. We have sufficient reasons to prove that these accusations of Europe and the United States are pure nonsense, but also have sufficient reasons to prove that China's production capacity and technology can benefit the world.

Trust and trade-offs: How to manage Europe's green technology dependence on China

Source: European Council on Foreign Relations

Author(s): Alexander Lipke, Janka Oertel, Daniel O'Sullivan

As the world moves ever more deeply into strategic competition between China and the advanced industrial economies of the West, Europeans have to reassess their approach to this shifting landscape. Washington and Beijing are making their own calculations about how they balance their national security with their economic interests – and their ties to one another. Each is using legislative, trade, and other tools as part of this competition. The European Union is acting too, but it is facing a specific set of challenges.

China's dominance of the green technology supply chain means decisions made in Beijing affect the EU's ability to pursue the energy transition. At the same time, the EU's legal commitment – and public pressure within the bloc – to tackle the climate crisis is stronger than in either the United States or China, making it harder for European policymakers to resile from climate action.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.