EU-China rift deepens as Vestager launches clean tech subsidy investigation

Dissatisfaction with the European Union is mounting in Beijing following the European Commission’s launch of an inquiry into Chinese wind turbine suppliers.

Wind parks in five EU member states – Spain, Greece, France, Romania and Bulgaria – will undergo scrutiny to determine whether illegal subsidies have been granted to Chinese wind turbine producers, sparking fears of harm to Europe’s domestic industry from cheaper imported clean tech products.

The move comes six months after the Commission formally launched an anti-subsidy investigation into the imports of battery electric vehicles (BEV) from China. The investigation will conclude whether BEV value chains in China benefit from illegal subsidisation and whether this threatens domestic BEV producers.

Commission executive vice-president Margrethe Vestager announced the inquiry on 9 April during a speech on technology and politics at the Institute for Advanced Study in Princeton, New Jersey, and acknowledged China has built a strong position in the technological revolution but has not always played fair.

‘Massive subsidies”‘

According to Vestager, China came to dominate the solar panel industry by attracting foreign investment, acquiring the technology, and granting “massive subsidies” for domestic suppliers, before exporting excess capacity cheaply.

“Nowadays, less than three per cent of the solar panels installed in the EU are produced in Europe. We see this playbook deployed across all clean tech areas – as China doubles down on a supply-side support strategy, to address its economic downturn.”

In-depth investigations into Chinese companies in the solar photovoltaic sector were recently launched by the Commission, resulting in a Chinese state-owned company withdrawing its bid in a public tender for trains in Bulgaria.

Vestager, who has been European Commissioner for Competition since 2014, said this endangers competitiveness and the bloc’s economic security, adding the EU has seen how one-sided dependencies “can be used against us”, adding: “We’re making full use of the tools that we have. We can’t afford to see what happened on solar panels, happening again on electric vehicles, wind or essential chips.”

‘Typical protectionism’

Chinese Commerce Ministry spokesperson He Yadong called the move “typical protectionism”, arguing that Chinese new energy companies have secured a leading position globally through innovation, sound production and full market competition.

“This could not be achieved through subsidies. China is strongly dissatisfied with and firmly opposes this action. Such a move will turn the EU into an obstructer of global green transformation, an obstacle of China-EU investment cooperation, and a destroyer of mutual economic and trade trust,” remarked the spokesperson.

China’s Chamber of Commerce to the EU (CCCEU) also expressed dissatisfaction with what it called a “lack of transparency” in the EU’s intervention in the “regular business of Chinese enterprises” in the bloc.

“This action sends a detrimental signal to the world, suggesting discrimination against Chinese enterprises and endorsing protectionism,” a statement of the CCCEU read.

It also mentioned reports by Chinese companies that the Commission’s FSR investigations have widened the definition of “foreign financial contribution” beyond subsidies, and have imposed tight deadlines for submitting sensitive materials.

Strategising the clean tech battle

In 2023, the European Commission presented centrepieces of a strategy to ensure it accelerates and leads the clean energy transition, competing with the United States and China in producing clean tech.

The Commission explained global investment in the green revolution is set to triple by 2030. China produces 80 per cent of the global solar panel output and about two-thirds of the world’s electric vehicles, wind turbines and lithium-ion batteries.

An agreement on the Net-Zero Industry Act (NZIA) was reached earlier in February, and it is expected to enter force later this year. The NZIA aims to simplify the process of granting permits for projects that enhance EU manufacturing, ensuring they are authorised within a period of 18 months.

In January, a Commission study found China is outpacing the EU in clean-energy research, posing a challenge to the bloc’s green-tech ambitions. In 2021, China surpassed other nations in the quantity of peer-reviewed publications covering solar and wind power, lithium battery technology, heat pumps, and carbon capture. It marks a shift from 2010, when the EU dominated publications in these sectors, except for wind power.

Chinese Commerce Minister Wang Wentao recently argued that the West’s “narrative on China’s alleged ‘overcapacity’ in the green economy lacks substantiation.” The minister urged Europe to revise its perception of China’s global competitiveness in new energy vehicles.

[By Xhoi Zajmi I Edited by Brian Maguire | Euractiv’s Advocacy Lab ]

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