EU Trade Chief Warns Businesses Questioning Future in China

The EU’s trade chief told Beijing Monday that tough security laws and a more “politicized” business environment have left European companies struggling to understand their obligations and questioning their future in China.

China’s refusal to condemn ally Russia for its war in Ukraine also poses a “reputational risk” for the world’s second-largest economy, Trade Commissioner Valdis Dombrovskis said in a speech at Beijing’s Tsinghua University.

He said transparency and openness were “a winning strategy in the long run,” at a time when trade tensions between the European bloc and China are mounting.

“China is navigating a challenging transition from an investment-led economy to a broad-based economy,” he said. “For this it needs to remain open.”

Dombrovskis’s four-day trip, which kicked off Saturday, follows a report by the EU Chamber of Commerce that showed business confidence was at one of its lowest levels in years.

It also follows Brussels’ decision to launch a probe into Beijing’s electric car subsidies.

The investigation could see the EU try to protect European carmakers by imposing punitive tariffs on vehicles it believes are unfairly sold at a lower price.

Chinese Vice Premier He Lifeng reiterated Beijing’s “strong dissatisfaction” over the probe Monday.

“China once again expresses its high concern and strong dissatisfaction with the EU’s plan to launch an anti-subsidy investigation into Chinese electric vehicles,” He told a joint news conference with Dombrovskis following their talks.

“We hope that the EU side will deal with that issue with caution and continue to maintain a free and open market,” he added.

But Dombrovskis painted a more positive picture of Monday’s conversations, saying the two sides had agreed to “resume regular exchanges” over economic issues.

“China’s economic performance is critical also for a broader global economy,” he said.

“We therefore agreed to resume regular exchanges to discuss macroeconomic issues, reigniting the economic and financial dialogue and macroeconomic dialogue will be important in this regard and we look forward for these dialogues in coming months,” he added.

Vice Premier He also said the two sides had agreed to “strengthen communication and coordination on macroeconomic policies, work together to address global challenges such as the international food and energy crisis, and promote stable growth of the world economy.”

They will also restart an EU-China working group on alcoholic beverages, as well as “conduct dialogue and exchanges on the regulation of cosmetics,” He said. Both are areas of discord between the bloc and Beijing.

From ‘win-win’ to ‘lose-lose’

Earlier in the day, the EU trade commissioner said growing challenges for European business in China meant that “what many saw as a ‘win-win’ relationship in past decades could become a ‘lose-lose’ dynamic in the coming years.”

A new foreign relations law aimed, in part, at combating foreign sanctions and a recent update to China’s tough anti-espionage regulations are of “great concern to our business community,” Dombrovskis said.

“Their ambiguity allows too much room for interpretation,” he warned.

“This means European companies struggle to understand their compliance obligations: a factor that significantly decreases business confidence and deters new investments in China.”

Asked about Dombrovskis’s remarks, China’s foreign ministry insisted the country would “protect the legitimate rights and interests of individuals.”

“We will continue to provide a market-oriented, legal and international business environment for companies from all over the world to legally operate in China,” foreign ministry spokesperson Wang Wenbin told a regular briefing.

“China is not the source of risks, but rather a firm force for preventing and defusing risks,” he added.

The EU commissioner also criticized China’s refusal to condemn Russia’s war in Ukraine, which he said, “is affecting the country’s image, not only with European consumers, but also businesses.”

China has sought to position itself as a neutral party in the Ukraine conflict, while offering Moscow a vital diplomatic and financial lifeline as its international isolation deepens.

Chinese President Xi Jinping visited Moscow in March, while Russian leader Vladimir Putin is due to visit China next month.

“Territorial integrity has always been a key principle for China in international diplomacy. Russia’s war is a blatant breach of this principle,” Dombrovskis said.

“So, it’s very difficult for us to understand China’s stance on Russia’s war against Ukraine, as it breaches China’s own fundamental principles.”
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