China rails against EU’s train subsidy probe – will relations be thrown off-track?

Name: China-EU summit: Xi Jinping calls on EU leaders to work together and strengthen mutual trust
Uploaded: 2024-02-21T13:00:26.000Z
Duration: 1 min 8 s
Description: China-EU summit: Xi Jinping calls on EU leaders to work together and strengthen mutual trust

The EU has begun an investigation into subsidies a Chinese train maker received in its bid for a contract, upsetting already strained relations

Train probe comes soon after anti-subsidy inquiry over China’s electric vehicles, suggesting scrutiny unlikely to let up

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Chinese train maker CRRC Qingdao Sifang, factory pictured, has come under scrutiny in a European Union subsidy investigation. Photo: Xinhua

Kandy Wong

Published: 9:00pm, 21 Feb 2024

A recently unveiled probe by the European Union into a Chinese state-owned train maker – the first in-depth examination conducted under the EU’s newly implemented Foreign Subsidies Regulation – could inject more uncertainty into relations and signify an intensification of efforts to execute Brussels’ de-risking strategy.

Friday’s move against CRRC Qingdao Sifang Locomotive – a subsidiary owned by CRRC Corporation, the world’s largest rolling stock manufacturer – may bring some “roughness” to the bilateral trade and investment relationship, analysts said, although the multi-decade trade history between China and the bloc is likely to provide some cushion against drastic changes.

But the timing suggests more action may be forthcoming, as the investigation was launched only five months after the EU began a separate inquiry over subsidies received by Chinese electric vehicle producers.

The contract which prompted the EU probe was issued by Bulgaria’s Ministry of Transport and Communications. It covers the purchase of 20 electric “push-pull” trains, as well as maintenance and staff training. The tender had an estimated value of €610 million (US$658.4 million), and CRRC Qingdao Sifang’s bid was €300 million – 46.7 per cent lower than projections from Bulgarian railways and 47.5 per cent lower than the nearest competitor, according to the Financial Times.

Per the regulation, companies are “obliged” to provide notification for any public procurement tenders with a contract value of more than €250 million.

CRRC Qingdao Sifang submitted its notice in full on January 22. The regulation has a statutory mandate of 110 days to deliver a result, meaning the verdict will be known no later than July 2. The strictest consequences under the terms of the regulation would bar the company from fulfilling the contract.

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China-EU summit: Xi Jinping calls on EU leaders to work together and strengthen mutual trust

“The EU has a clear direction of setting up rules … to protect its own competitive edge and ensure economic safety,” said Cui Hongjian, a scholar at the China Institute for International Studies.