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Shi Yonghong, Vice President of China Chamber of Commerce for Import and Export of Machinery and Electronic Products, provided by the interviewee

"During the sampling survey and the entire response process, we have been communicating with the European Commission and submitting written objections. At the same time, we have organized exchanges with Chinese companies and have had close communication and exchanges with companies on how to respond to the EU anti-subsidy investigation." On July 29, Shi Yonghong, vice president of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (referred to as "China Machinery and Electrical Chamber of Commerce"), said in an exclusive interview with the Beijing News Shell Finance reporter.

Ten days ago, Shi Yonghong led a delegation to attend the post-preliminary hearing of the EU's anti-subsidy investigation on Chinese electric vehicles in Brussels, Belgium. At the meeting, Shi Yonghong, on behalf of the electric vehicle industry, explained China's point of view to the European Commission - the Chinese electric vehicle industry requested the European Commission to correct the erroneous determination of the preliminary ruling and terminate the investigation.

On July 4 this year, the European Commission announced a preliminary ruling to impose a temporary anti-subsidy tax of 17.4% to 37.6% on Chinese electric vehicles. According to the EU anti-subsidy procedure, the European Commission is expected to make a final ruling in early November 2024.

The China Chamber of Mechanical and Electrical Engineering was authorized by 12 major Chinese electric vehicle companies to participate in the damage investigation procedure as an interested party. Shi Yonghong said that the development and growth of the EU and Chinese electric vehicle industries lies in cooperation rather than conflict, and China remains open to and hopes for a balanced solution to this investigation. The China Chamber of Mechanical and Electrical Engineering will continue to respond to cases on behalf of the Chinese electric vehicle industry and safeguard the legitimate rights and interests of electric vehicle companies.

On Defense

We have negotiated with the European Commission regarding the unreasonable findings in its preliminary ruling

Beike Finance: On July 18, you led a delegation to attend the post-preliminary hearing of the EU's anti-subsidy investigation on China's electric vehicles. What objections did you express?

Shi Yonghong: At the hearing, the China Chamber of Mechanical and Electrical Engineering, on behalf of the industry, elaborated on China's views on the errors, unreasonable determinations and violations of WTO rules in the European Commission's preliminary ruling report.

First, the European Commission did not sample Chinese exporters according to the principle of maximum export volume in accordance with the rules and previous practices. It only sampled three Chinese companies that represented 39% of China's total exports. At the same time, the production and sales volume sampled from the EU industry was less representative. The four EU companies sampled accounted for only 30% and 32% of the production and sales volume of the EU industry, respectively. This led to underlying representativeness problems in the European Commission's price impact analysis and data collection of EU industry microeconomic indicators.

Second, the European Commission violated the obligation of affirmative evidence and objective review in price comparison. By comparing the prices of three Chinese sampled enterprises and four EU sampled enterprises, the European Commission determined that Chinese enterprises had a price reduction of 12.7%, which was used as the most important support for determining the threat of damage. However, the European Commission did not take into account the export prices of foreign-branded products to the EU, which account for about 70% of China's total exports to the EU. If it were considered, then Chinese products would most likely not have price cuts on EU products, thus reversing the conclusion of the threat of damage. In addition, the European Commission refused to consider the impact of factors such as brand premium, physical differences and market segments on price comparison. In particular, the European Commission believed without investigation and evidence that the brand premium accumulated by EU products in the field of fuel vehicles did not exist in the field of electric vehicles. This determination goes against the general perception of markets and consumers around the world.

In addition, there is another very important point: the European Commission also seriously lacks transparency in its procedures. For example, when the EU industry did not apply for anonymity and confidentiality, the European Commission uniformly required EU producers to remain anonymous, which seriously damaged the defense rights of Chinese exporters; in the preliminary ruling, the European Commission cited a large amount of external information collected independently as macroeconomic indicators of the EU industry, but this information had not been disclosed before and had not been included in the case files. The EU's relevant practices seriously lack transparency.

Beike Finance: How will the China Chamber of Commerce for Machinery and Electronics defend Chinese companies?

Shi Yonghong: In October 2023, the European Commission launched an anti-subsidy investigation against Chinese electric vehicles. The China Chamber of Commerce of Machinery and Electronics was authorized by 12 major Chinese electric vehicle companies, including three Chinese sampled companies, to participate in the damage investigation procedure as an interested party. So far, the China Chamber of Commerce of Machinery and Electronics has organized 11 case work meetings for companies, submitted 6 industry defense opinions to the investigation authority on behalf of the industry, and issued 4 public statements. The Chamber of Commerce, on behalf of the Chinese electric vehicle industry, protested against the unfair, unreasonable and opaque practices of the European Commission in terms of the investigation procedures, damage threats, causation, etc.

The China Chamber of Mechanical and Electrical Engineering will continue to respond to cases on behalf of the Chinese electric vehicle industry and safeguard the legitimate rights and interests of electric vehicle companies.

Talk about investigation

Hope for a balanced solution before final ruling

Beike Finance: In mid-July, the results of the EU's vote among EU member states on temporary anti-subsidy tariffs on Chinese electric vehicles were released. What do you think of this vote?

Shi Yonghong: We are also very concerned about this vote. In fact, the European Commission has made a consultative vote on the preliminary ruling. The vote is not binding, but it can reflect the basic attitude and position of each member state on this case.

The written opinions of the vote were: 12 EU member states supported, 4 opposed, and 11 abstained. The result first reflects that there are still great differences among the member states of the European Commission on this case, and the majority of them disagree.

Beike Finance: What do you think of the European Commission’s launch of an anti-subsidy investigation into Chinese electric vehicles?

Shi Yonghong: Europe is a traditional automobile manufacturing powerhouse. In recent years, China's electric vehicle exports have grown rapidly, especially as it has begun to enter the traditional automobile market in Europe. Chinese electric vehicles are very competitive. The EU is relatively slow in the transformation of electric vehicles, which has put great pressure on the EU electric vehicle industry. Therefore, the EU's imposition of tariffs on Chinese electric vehicles is actually a form of trade protectionism. In addition, the European Commission announced last year that it would launch an anti-subsidy investigation on Chinese electric vehicles, and there are also some political factors to consider.

We have carefully studied and analyzed the preliminary ruling report and found that many of its findings are unreasonable and do not comply with relevant WTO rules. In fact, many practices are inconsistent with the EU's anti-subsidy investigation rules and some of its past customary practices. The entire report lacks fairness and objectivity, so we raised objections and protested these unreasonable points in person at the hearing on July 18.

Beike Finance: The countdown to the final ruling has begun. What measures will the China Machinery and Electrical Chamber of Commerce take to safeguard the legitimate rights and interests of Chinese companies?

Shi Yonghong: After the preliminary ruling was announced, we requested the European Commission to hold a hearing and submitted written objections to the preliminary ruling, which is a right granted by law. At the same time, we also noticed that the Chinese government and the European Commission have held multiple rounds of consultations at the technical level, hoping to reach a solution acceptable to both parties as soon as possible.

China strongly demands that the investigation be terminated, so it may be necessary to find a solution acceptable to both China and Europe that takes into account some of the anxieties and concerns of the European side while also safeguarding the legitimate rights and interests of Chinese companies.

Of course, we hope that a balanced solution can be found before the final ruling of this investigation. We also hope that the EU and China can meet each other halfway, show the utmost sincerity, and jointly maintain the overall situation of China-EU automotive industry cooperation.

Talking about going overseas

Imposing tariffs will affect competitiveness. Fair competition is the prerequisite for cooperation.

Beike Finance: What impact will the European Commission's imposition of temporary anti-subsidy duties have on China's electric vehicle exports to Europe?

Shi Yonghong: The additional tariffs will affect the competitiveness of Chinese electric vehicle companies in Europe. Chinese auto companies have not been in the European market for long, and their brand influence and popularity are gradually increasing. If the price is significantly increased due to the additional tariffs, it will have an impact on the sales of auto companies, especially domestic brands in the European market, and the impact will be differentiated due to different tax rates.

Beike Finance: Have Chinese automakers adjusted their strategic planning in the European market?

Shi Yonghong: Over the years, China's electric vehicle industry has relied on its own unremitting efforts to work hard on product research and development and technological innovation. At the same time, it has also accumulated advantages and achieved continuous development by relying on free competition and a complete supply chain system. It has provided green, environmentally friendly, and cost-effective electric vehicles to consumers around the world, including Europe. It has been highly recognized by consumers, promoted the safe development of the global automotive industry chain, and made important contributions to achieving global green and low-carbon goals.

Chinese automakers are willing to conduct broader and deeper exchanges and cooperation with European automakers, including actively considering global layout, but the premise of cooperation is fair competition. The unfair and unjust approach adopted by the European Commission in the EU's anti-subsidy investigation on electric vehicles has seriously hindered cooperation between Chinese and European companies.

In addition, the EU Foreign Subsidies Regulation (FSR) came into effect on July 12, 2023. As of June 2024, the EU has launched three in-depth investigations, one proactive investigation, and one surprise inspection against Chinese companies. There are also dozens of investment and M&A projects involving Chinese companies that may be affected by FSR investigations. The EU has launched multiple FSR investigations against Chinese companies, with clear targets and de facto discrimination. They are suspected of violating the WTO's most-favored-nation treatment, national treatment and other relevant rules, which seriously distort the fair competition environment and impose a serious burden on Chinese companies' operations and development in Europe. The China Chamber of Commerce for Machinery and Electrical Equipment hereby reminds companies that when planning overseas markets, they should fully consider the impact of multiple factors, operate in compliance, be targeted, and guard against possible risks.

Beike Finance: What suggestions do you have for China-Europe economic and trade exchanges?

Shi Yonghong: The China-EU automotive industry chain is interdependent and has broad prospects for cooperation. Over the years, a development pattern of mutual integration and interconnection has been formed. China has always upheld an open and inclusive attitude of cooperation, supporting EU automotive companies to invest and operate in China, and realizing the complementary advantages and common development of China and the EU through cooperation and dialogue. China is an important export market for fuel vehicles to the EU and an important market for investment by EU automotive companies. China's electric vehicle industry purchases a large number of parts from EU companies. Some Chinese car companies and battery companies have also invested in setting up factories in Europe, bringing jobs and industrial technology to Europe. The current investigation by the EU will have an impact on the good momentum of the integration of the interests of the automotive industries of both sides, and undermine the stability of the automotive industry chain and supply chain of both sides and even the world.

The best way for the EU to promote the development of local green industries is not to take trade protection measures against Chinese products. Trade protectionism can never truly protect and develop relevant industries in the EU. On the contrary, it will hinder their long-term competitiveness. Only cooperation and mutual benefit between the Chinese and European automotive industries can meet the fundamental interests of both sides.

China and Europe are comprehensive strategic partners with huge potential for cooperation. The China Chamber of Mechanical and Electrical Engineering hopes that the EU will uphold an open and cooperative attitude, promote exchanges through dialogue, promote development through cooperation, use trade remedy measures prudently, support the comprehensive cooperation between the Chinese and European automotive industries in product research and development, technological progress, intellectual property protection, investment facilitation, etc., and work together to promote the healthy development of the global electric vehicle industry chain, respond to global climate change, and achieve carbon neutrality goals.

Zhang Bing, a financial reporter from Beijing News Shell, and Wang Jinyu, an editor, and Yang Xuli, a proofreader