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China-EU relations
ChinaDiplomacy

China firms warn EU foreign subsidy rule could hit investor confidence

  • Regulation aimed at state-backed Chinese firms ‘underestimates’ administrative burdens it will place on non-EU companies
  • Analysts warn the new rules will also affect companies from the US and Britain, Europe’s biggest trading partners

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A new foreign subsidies regulation targets all non-EU countries but the European Commission is keen to use it to crack down on Chinese companies backed by state-funded loans which invest in the European Union. Photo: AFP
Priyanka Shankar
State-backed foreign firms acquiring companies in the European Union will be subject to a regulation which aims to address foreign subsidy distortions in the bloc’s internal market.
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But Chinese businesses said the new regulation – which comes into force next year – may slash their confidence in the European market.

The regulation – proposed by the European Commission in May 2021 and approved by EU nations last week – allows the investigation of acquisitions worth €500 million (US$516 million) and public procurement bids from firms worth €250 million, if it finds them benefiting from foreign subsidies.

From 2023, the commission will be able to investigate subsidies from the previous five years.

The new rules also state that if companies do not reveal the foreign subsidies they get from non-EU countries, the European Commission has the power to impose hefty fines on them until they get the notification.

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“We want to make sure European companies are not undermined by foreign subsidies,” commission vice-president Margrethe Vestager said.

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