BEIJING, October 4 (TMTPost)— China blasted the European Union (EU)’s official launch of an investigation into electrice vehicle (EV) subsidies.

Credit：Visual China

China felt very dissatisfied with EU’s investigation as it is based on subjective assumption, lacks adequate evidence, and doesn’t adhere to World Trade Organization rules, a spokesperson of the Ministry of Commerce (MOFCOM) commented on Wednesday. In the high-level dialogue with EU representatives in late September, China has called the subsidy probe “naked protectionist behavior” under the cover of “fair trade”, and cautioned such attempt will severely disrupt and distort the global automotive industrial and supply chain, of which EU has a part, and impose negative impact on China and EU’s economic and trade relationship, the spokesperson said. The person urged EU to safeguard stability of the worldwide industrial and supply chain and the strategic partnership between China and Europe, apply trade remedies with prudence, and encourage deep cooperation on EV and other new energy industries. The person said Beijing will keep a close eye on EU’s following investigative procedures and firmly protect rights and interests of Chinese firms.

China Association of Automobile Manufacturers (CAAM) also expressed its serious dissatisfaction in a statement posted by its official WeChat account on Wednesday. It is very clear that China, as the largest overseas market for many EU car companies, has heated competition and is by no means supported and protected by subsidies, however, EU ignores the fact and insists on launching a countervailing investigation, which is “an obvious protectionist act”, according to CAAM. The auto industry body expected such move will definitely cast a shadow on the development of global electric vehicles, slow the development of EV industry across the world including EU down, and have an adversely affect on the process of global carbon neutrality.

On September 13, European Commission President Ursula von der Leyen announced EU’s executive body is going to launch an anti-subsidy investigation into EVs from China. EV sector is a crucial industry for the clean economy, with a huge potential for Europe, but “global markets are now flooded with cheaper Chinese electric cars”, and their price is “kept artificially low by huge state subsidies”, which is distorting European market, von der Leyen said in her state of the union stress to the European parliament. Head of the executive arm said Europe is open for competition, not for a race to the bottom. While stressing EU would defend itself against unfair practices, she cautioned “it is vital to keep open lines of communication and dialogue with China”. The official reiterated de-risking, instead of decoupling, from China.

The European Commission will decide whether to impose tariffs more than the current 10% standard rate for cars in the coming 13 months. The possible tariff will affect not just Chinese automakers but also foreign brands that produce vehicles there such as Tesla, Renault and BMW. EU’s probe may have triggered a major battle. The move may result in tariffs close to the 27.5% level already imposed by the U.S. on Chinese EVs, Bloomberg cited people familiar with the matter following von der Leyen’s announcement.

The investigation that could lead to tariffs raised concern about retaliation from China, the world’s largest EV market. “The probe, in the name of fair competition, is a blatantly protectionist act that will seriously disrupt and distort the global automotive industry and supply chain, including the EU, and will have a negative impact on China-EU economic and trade relations,” a spokesperson of China's Ministry of Commerce said right after von der Leyen’s announcement. China and EU auto industries have huge room for cooperation and share extensive common interests, and China welcome European automobile companies to further investments in China, including those in EV sector, said the spokesperson, who urged dialogue between two parties to create a fair, non-discriminatory and predictable market environment for development of the EV industry in China and Europe. "China will keep a close eye on the EU's protectionist tendencies and follow-up actions, and firmly safeguard the legitimate rights and interests of Chinese companies," the spokesperson added.

Later September, Chinese Foreign Ministry spokesperson Mao Ning stressed that China opposes all forms of trade protectionism. EU’s plan to take will disrupt the stability of global auto industrial and supply chains and will not serve anyone’s interests, Mao warned.

“The EU has no intention to decouple from China,” the Executive Vice President of the European Commission Valdis Dombrovskis said ahead of the 10th China-EU High-Level Economic and Trade Dialogue held last week. EU has a very imbalanced trade relationship with China and needs to protect itself in stituaitons when its openness is abused, the EU’s chief trade negotiator said. While EU wants to minimize strategic dependencies for a select number of strategic products, its economic strategy was focused on de-risking, not decoupling, he said. During his visit in China for the dialogue, Dombrovskis revealed the probe will be fact-based and in line with EU and World Trade Organization rules, and added he cannot prejudge the outcome. He noted shares of Chinese EV brands in EU market have risen from less than 1% to 8% in the past two or three years.