EU investigation into Chinese EV subsidies sparks debate over 'unfair' treatment

Beijing rejected the accusations and retaliated by opening an anti-dumping investigation into EU pork imports.

Yuyuan Tantian, a social media channel affiliated with Chinese state broadcaster CCTV, said on Friday that the E.U. anti-subsidy investigations “went well beyond the scope of traditional anti-subsidy investigations and abused World Trade Organization rules.”

Over the past decade, the EU has launched anti-subsidy investigations that go beyond direct government subsidies to other areas such as land, loans and electricity supplies.

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Wang Yong, vice dean of the School of New Structural Economics at Peking University, said the EU was working on a “misconception” about China’s dominance in the global electric vehicle market.

Rather than being the result of state subsidies, he explained that they were the result of fierce competition at the national level.

“The Chinese domestic market is already very competitive. To survive in the domestic market, prices must fall continuously,” Wang said.

He also said electric vehicles can bring broader societal benefits, such as energy conservation and environmental protection, but they may require large initial investments and struggle to generate revenue. profits. “So of course they absolutely need subsidies,” Wang said.

China’s central and local governments provided between 200 billion and 250 billion yuan ($27.5 billion to $34 billion) in direct subsidies to electric vehicle manufacturers over a 13-year period before ending them last year, Securities Times reported in November last year.

It still offers tax cuts for buyers and said these would remain in place until 2027, while critics of China’s approach said a large number of other subsidies were on offer and complaints of a lack of transparency.

A July 2023 study by US consultancy AlixPartners calculated that the value of Chinese government subsidies for electric vehicle buyers alone could reach US$57 billion over a six-year period from 2016 to 2022.

A number of European governments also offer subsidies to buyers of electric vehicles, while in the United States, manufacturers can receive subsidies if they comply with certain rules on components produced in North America – a move that the Europe and China criticized it as unfair.

According to Berlin-based think tank Sinolytics, Germany and the United States both offered higher tax credits to buyers than China last year, with US$7,500 (€6,800) available to US buyers, compared to 6,200 euros per vehicle in Germany and 4,000 euros in Germany. China.

But James Zimmerman, former president of the American Chamber of Commerce in China, said Chinese subsidies go far beyond incentives for buyers.

“They include significant government supports that support local manufacturers with cheap land resources, deep discounts on energy inputs, docile labor and cheap labor, financing for production , subsidies for R&D investments, bulk purchases by government agencies and a reduction in corporate income taxes since then. Electric vehicles are referred to as high-tech companies.

Zimmerman, a partner at international law firm Perkins Coie, also said: “All governments do provide some types of subsidies, but it is a question of fairness and competitiveness.

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“If subsidies and preferential treatment are so extensive that they distort markets and lead to inefficiencies, then these subsidies are not fair and constitute anti-competitive behavior. »

Jacob Gunter, senior analyst at the Berlin-based think tank Mercator Institute for China Studies, said the EU’s tariff hike is justified because the scale of subsidies in China “is so large” compared to relatively large EU subsidies. “modest”.

“It is about subsidies as a tool to promote the development of industries and become strong in certain sectors and highly competitive in certain sectors,” he said, adding that this type of policy was generally not viewed favorably by the WTO.

Gunter said the EU investigation had been thorough and “there is extensive public documentation of things that the Chinese government has made public for a very long time regarding the level of subsidy, the availability of cheap loans, free land, all traditional practices.” a sort of industrial policy.

He added: “We’re talking about support potentially worth tens of thousands of dollars, huge amounts of sub-market funding, all sorts of different things. But when added together, this gives an incomparable level of subsidies.”