EU trade chief warns China on European investment

New security laws and Beijing’s stance on the war in Ukraine are putting European investment in the country at risk, the European Union’s trade commissioner has warned China. Valdis Dombrovskis said European companies were questioning their future in China following the introduction of vaguely drafted laws on national security and foreign espionage.

“The new foreign relations law and updated anti-espionage Law are of great concern to our business community. Their ambiguity allows too much room for interpretation. This means European companies struggle to understand their compliance obligations: a factor that significantly decreases business confidence and deters new investments in China,” he told an audience at Beijing’s Tsinghua University.

Mr Dombrovskis was in Beijing for the EU-China High-level Economic and Trade Dialogue, the tenth meeting of its kind but the first to be held in person since the coronavirus pandemic. The EU had a trade deficit with China of almost €400 billion last year out of a record volume of €865 billion in bilateral trade.

The EU has accused China of failing to offer a level playing field for European business and commission president Ursula von der Leyen this month announced an investigation into Chinese subsidies to electric vehicle manufacturers. Chinese electric vehicles have made a dramatic entry into the European market, capturing an 8 per cent share which EU officials think could almost double within two years.

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China has condemned the investigation as an act of naked protectionism designed to insulate European carmakers from their niftier Chinese rivals. Mr Dombrovskis promised that it would be conducted fairly, in accordance with “well-established rules” and in consultation with Chinese authorities and stakeholders.

“The EU welcomes competition. It makes our companies stronger and more innovative. However, competition must be fair. And we will be more assertive in tackling unfairness,” he said.

The trade commissioner criticised Beijing’s neutral stance on the war in Ukraine and its failure to condemn Russia’s invasion or to join in western sanctions against Moscow. He said that China’s stance was difficult to understand in view of Beijing’s long-standing position that each country should be free to choose its own development path.

“There is also a reputational risk to China. Its position on the war in Ukraine is affecting the country’s image, not only with European consumers, but also businesses. Over a third of EU companies in this country have indicated that China’s position on the war is making it a less attractive investment destination,” he said.

China’s foreign ministry rejected Mr Dombrovskis’s criticism, dismissing his claim that Beijing’s focus on national security was undermining the business environment for European companies with Chinese operations.

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