Analysis: EU and China trade blows over trade, what's the latest?
The Suez Special Economic Zone in Egypt is where the European Union fired a warning shot at China over its global trade ambitions.
For the first time ever, Brussels has slapped tariffs on Chinese-owned companies outside of China, in this case, exporters of fibreglass fabrics used in everything from wind turbines to sports equipment.
The EU thus penalised a practice China is using to strengthen its foothold on EU markets.
“This is a clear message that Brussels is sending, that such kinds of subsidised goods, even if they are not subsidised by their home country, Egypt in that case, but by a third country indirectly, won’t be allowed on the European market,” says Agatha Kratz, associate director at Rhodium Group.
“So that’s a pretty strong case to be made. It’s also a new one and it’s a new approach and a new reading of what Brussels and DG Trade can do.”
In response, China lashed out at the EU decision saying it violated World Trade Organization rules.
Differences should be resolved through negotiation, Beijing declared.
The EU is stepping up its efforts to guard against expansionist Chinese commercial policies, and other cases from other industries are in the pipeline.
“The role of the Commission is to uphold the Single Market and to take action when third country subsidies and third countries subsidizing their companies distort the level playing field within our Union,” said Margrethe Vestager, EU Commission Vice President, on June 17.
There is widespread fear in Europe among policymakers and in the corporate world of China’s predatory buying of European assets, and of China conquering European markets by more subtle means.
“The next step is to make sure that the application, the measures that have just been imposed, are effectively enforced,” says Laurent Ruessmann of International trade lawyers, Fieldfisher.
“Because we know unfortunately from experience that especially Chinese producers are very inventive and innovative in the ways they find to avoid the application of the measures.”
But after a series of failures of Chinese-bought European companies, China has been drastically cutting back on direct investments: the peak was 2016 with 37 billion euro only to melt down to twelve billion last year. A trend that continued into 2020 only compounded by the Coronavirus crisis.
It appears European investors are buying more of corporate China.
“What we are seeing is actually a complete crash in Chinese outward investment in general, certainly into Europe as well,” says Agatha Kratz, associate director, at Rhodium Group.
“We see very little M&A and acquisition activity by Chinese companies and investors into the rest of the world and into Europe in particular. Strangely enough and funnily enough, we see much more opportunistic buying into China at the moment taking place.”
The question of course is: when will Chinese investors be back on their feet again?