The European Union has opened an investigation into China’s procurement of medical equipment. It is the most recent in a series of moves raising tensions ahead of President Xi Jinping’s first visit to the bloc in five years.
The investigation was officially announced on Wednesday morning Beijing time and is meant to deal with concerns that China is unfairly favoring domestic suppliers. The EU has already launched an investigation into the Chinese government’s support for electric automotive makers, which could lead on to latest tariffs, and additionally it is looking into other industries similar to wind energy, solar energy and railways.
The EU’s relations with Beijing have deteriorated over the past yr and beyond as Europe reacts more forcefully to China’s trade policies. European leaders have pushed back against China’s expansion of producing capability, its massive trade surplus and its support for Russia’s invasion of Ukraine.
The investigation is the primary use of the bloc’s so-called International Procurement Instrument, a 2022 law intended to advertise reciprocity in access to public procurement markets.
The investigation was first reported by Bloomberg last week and can initially deal with gathering information from corporations and member states before the authorities begin discussions with Beijing on fair and open markets. The investigation should be accomplished inside nine months.
If the EU detects a scarcity of reciprocity in procurement markets, it could restrict Chinese access to the bloc’s tenders. If dialogue with Beijing results in concrete corrective measures, the investigation may be suspended at any time.
The EU argues that Beijing has pushed market-distorting policies and practices to implement its “Made in China” policy and its goal of achieving an 85% domestic market share by 2025 for Chinese corporations producing “core components for medical devices.” The goal is 70% for high-end devices.
The bloc also claims the Chinese government discriminates against imported products and has at times imposed strict requirements on foreign corporations, including investment commitments or technology transfers to Chinese corporations.
Beijing’s deal with local and government-oriented medical technology procurement has increased in recent times as authorities across the country have introduced strict domestic product requirements for a lot of device categories. The shift turned China’s trade deficit in these goods of 1.3 billion euros ($1.4 billion) in 2019 right into a surplus of 5.2 billion euros ($5.5 billion) only a yr later ), in line with data cited in an EU report published earlier this month.
Anti-subsidy raid
This week the EU watchdogs took one other step ambushed the European premises of a security equipment company on Tuesday under latest anti-subsidy laws. The company’s nationality was not disclosed, however the Chinese Chamber of Commerce within the EU said it was “shocked”.
Nuctech, a state-owned company best known for making baggage screening equipment for airports around the globe, confirmed to Bloomberg that it’s “fully cooperating with the EU” but declined to substantiate whether the bags was checked .
In 2020, the US government opposed European governments to using Nuctech’s devices, accusing them of posing a security risk.
Market access
EU access to the Chinese procurement market has long been a difficulty, raised by each European Commission President Ursula von der Leyen and the bloc’s trade chief Valdis Dombrovskis during their trips to the country last yr. Other problems include unclearly defined market access conditions, the transmission of commercial data from China and invasive requirements for cosmetics corporations.
“Regrettably, our repeated discussions with China on this trade issue have been unsuccessful,” Dombrovskis said in a press release on Wednesday. “We trust that this IPI investigation will enliven our dialogue and help us find mutually acceptable solutions.”
As Bloomberg previously reported, there was little movement in talks over the past 12 months.
China’s medical technology market is estimated to be value 135 billion euros ($145 billion) in 2022, in line with Merics, a research institute specializing in China. The most vital European manufacturers within the industry include Siemens and Philips.
Last week, Chancellor Olaf Scholz was in Beijing warned that Europe will impose more trade defense measures if Beijing doesn’t address concerns about unfair competition, dumping and overcapacity. China argues that the US and Europe are using such criticism as a pretext for protectionist measures that protect their very own, less competitive corporations.
All of those issues, together with Europe’s calls for China to stop aid to Russia, are more likely to be high on the agenda if Xi travels to Europe in early May. He will visit the EU member states France and Hungary in addition to Serbia.
China is one in every of Europe’s biggest trading partners, however the EU’s top diplomat accountable for relations with Asia this week criticized the large export surplus that China has with the bloc.
“Chinese overcapacity and trade imbalances are of course an important factor affecting our relations,” Niclas Kvarnstrom, managing director for Asia on the European External Action Service, said in a press release interview. “We definitely believe it requires action on their part.”
Espionage arrests
Adding to the economic disagreements, the arrest of 4 people in Germany this week on charges of spying for China will increase tensions. There were three imprisoned Monday on suspicion of working for Chinese state security to acquire industrial secrets while one other person did so arrested Tuesday in reference to the spying on the European Parliament and Chinese opposition figures.
China’s Foreign Ministry responded to the espionage arrests.
“I hope that relevant people in Germany will abandon the Cold War mentality and stop manipulating political narratives against China by increasing this so-called espionage risk,” spokesman Wang Wenbin said on Tuesday. “We strongly reject this upgrade and also call on the relevant sites to stop spreading misinformation.”
Europe launched an anti-subsidy investigation into Chinese-made electric vehicles last yr that might see latest tariffs imposed by July. It reflects growing concerns about Beijing’s financial support for critical industries, which threatens to overwhelm potential competitors in Europe, in addition to a broader EU security strategy aimed toward tightening export controls and investment reviews.
Chinese leaders have pushed back against criticism from Europe and the United States that Beijing has distorted the Chinese market to profit its corporations.
“Industrial subsidies are a common practice in the world,” Chinese Premier Li Qiang said in his talks with Scholz last week, in line with a German government transcript. “Many countries have much more subsidies than China.”
The EU’s approach is consistent with a more assertive US stance towards China.
U.S. Treasury Secretary Janet Yellen told Chinese leaders during their visit last month that the country’s increased factory output has grow to be a world problem. The U.S. would “take nothing off the table,” including the potential for additional tariffs to stem the flow of Chinese goods, she said told CNN earlier this month.
