Beijing signals retaliation if Brussels furhter escalates anti-subsidy investigation on China

State broadcaster-run account cites anonymous, "informed" sources in warning the EU, and quotes a Chinese lawyer saying EU's wine, dairy, and aircraft exports to China could be a target.

Yu Yuan Tan Tian 玉渊谭天, a social media channel with a presence in China’s social media and known to be run by China Media Group, China’s state broadcaster, on Saturday, May 18 warned the European Union against further anti-subsidy investigations into Chinese companies by citing anonymous, “informed” sources saying China would retaliate with “a series of measures.”

Yu Yuan Tan Tian has learned that the Chinese industry is very dissatisfied with the EU's subsidy policies and malicious practices, believing that they severely harm the interests of Chinese industries, and has called on the government to use all means to retaliate, including initiating anti-subsidy and anti-dumping investigations.

Yu Yuan Tan Tian also understands that in response to the EU's continuous and vocal expansion of anti-subsidy investigations against Chinese companies, China actually has ample countermeasures. If Europe continues to act, China may have to take a series of measures in retaliation.

Regarding the actions of some EU politicians to suppress Chinese companies, Yu Yuan Tan Tian has learned that China has prepared sufficient countermeasures.

Yu Yuan Tan Tian then went on to quote a Chinese lawyer named 沈倩 SHEN Qian as saying the EU’s wine and dairy products have a dependence on the Chinese market. The lawyer was also quoted as saying the EU’s aviation products also have a dependence on the Chinese market.

Lawyer Shen Qian, who is familiar with the field of trade and economics, told Yu Yuan Tan Tian that the EU is very dependent on the Chinese market for agricultural products, including wine and dairy products.

As Yu Yuan Tan Tian just mentioned, there is a significant amount of subsidies in EU agriculture. In fact, last September, China's Ministry of Commerce announced an anti-subsidy ruling on potato starch imported from the EU and continued to levy a countervailing duty.

Shen Qian said that the EU's subsidy and dumping practices have caused substantial damage to related industries within China, so it is necessary for China to take concrete actions to demonstrate its determination to protect the interests of Chinese enterprises.

In fact, besides agricultural products, the EU also relies on the Chinese market in other sectors, such as aviation.

A recent report released by Airbus anticipates that China is expected to surpass Europe and America to become the world's largest aviation services market. This represents an opportunity for European aircraft companies.

Yu Yuan Tan Tian didn’t mention the relationship between Shen Qian and its anonymous, “informed” sources.

The report includes the following picture

The text reads: “Informed people say if Europe continues to take action, the Chinese side will very likely have to adopt a series of measures.”

Yu Yuan Tan Tian also mentioned

We all know that the EU is committed to implementing proactive climate policies, but over the years, agricultural pollution emissions in EU countries have remained largely unchanged, and this is related to subsidies. According to the EU's 2023-2027 mid-term budget, the EU directly pays 194 billion euros in agricultural subsidies to its member states, averaging 38.8 billion euros per year. Studies have shown that 82% of EU agricultural subsidies flow to high-emission livestock industries. It is these subsidies that make agriculture a particularly challenging sector for Europe in addressing climate change.

The background of the warning carried by Yu Yuan Tan Tian is, as it said,

On May 13th, the European Commission announced that it will end investigations into two Chinese companies.

The situation originated when these two Chinese companies bid for a solar energy project in Romania, an EU member state. The European Commission, based on the "Foreign Subsidies Regulation," initiated a countervailing investigation against these companies on the grounds that both had received government subsidies that "distorted" the EU market.

Due to the complex burden of proof required, and because the EU did not give the companies sufficient time to prepare their materials, the two Chinese companies were forced to withdraw from the public procurement bidding for the project.

This is another incident in the past three months where Chinese companies have been forced to withdraw from bidding on projects in EU countries.

Previously, the European Commission launched a countervailing investigation against a Chinese company involved in a Bulgarian project, which was similarly forced to withdraw from bidding.

The EU's "Foreign Subsidies Regulation" came into effect on July 12, 2023. Since its implementation, the EU has launched three in-depth investigations, all targeting Chinese companies.

A few more words

1. Since Yu Yuan Tan Tian is known to be state-run and has a long record of obtaining exclusive access only granted to the very core part of Chinese media, its anonymous, “informed” sources are almost certainly in the Chinese government.

2. Yu Yuan Tan Tian didn’t exactly quote its anonymous, “informed” sources singling out the EU’s wine, dairy, and aviation exports to China. Those products were named by an outside lawyer. That caves out space for deniability and room for maneuver.

3. Whoever the anonymous, “informed” sources are, they certainly want to send a public message to Brussels. They somehow chose an outlet only with a presence on China’s social media and reporting only in Chinese, and on a Saturday. Luckily,

   they have Tom Hancock, a superb China reporter now based in Brussels, on duty for Bloomberg - and yours truly - to distill the message.