China slams EU foreign subsidies rules, links them to trade talks

China has accused the European Union of using its new Foreign Subsidies Regulation (FSR) to target Chinese companies, linking the issue directly to ongoing trade negotiations. The accusation comes amid heightened tensions during a critical phase of renewed bilateral talks between the EU and China, which aim to address the bloc's persistent trade imbalance with Beijing. The dispute centers around the EU’s investigation into JD.com, the Chinese e-commerce giant seeking to acquire Germany’s Ceconomy, the parent company of consumer electronics retailer MediaMarkt, in a €2 billion deal. The EU’s Competition Directorate is scrutinizing whether the acquisition might benefit from undisclosed state support, potentially giving JD.com an unfair advantage in the EU market. In response, the Chinese Ministry of Justice issued a directive instructing domestic firms not to cooperate with EU investigators under the FSR framework. This move is interpreted as an attempt to exert pressure on the EU during the current round of trade negotiations. The EU and China have been engaged in intensive behind-closed-doors discussions aimed at reducing the EU’s daily trade deficit with China, which stands at approximately €1 billion. These talks, part of a broader effort to stabilize their economic relationship, include plans for a videoconference between the EU Commission and the Chinese Ministry of Commerce in September. A follow-up visit by EU trade commissioner Maroš Šefčovič to Beijing is scheduled for early October, with a subsequent EU summit expected to assess progress and determine the future direction of the partnership. A spokesperson for China’s Ministry of Commerce criticized the EU’s approach, stating that the FSR is being used as a tool to “suppress Chinese companies” and called for the EU to “correct its erroneous practices.” The official emphasized that both sides had agreed to manage differences through dialogue and consultation within the framework of the Trade and Investment Consultation (TIC) mechanism. China expressed its intention to monitor the EU’s actions closely and take necessary steps to protect national security and corporate interests. In contrast, the EU maintains that the FSR is designed to apply equally to all companies operating within the bloc, regardless of their country of origin. Spokesperson Ricardo Cardoso reiterated that the regulation complies with World Trade Organization (WTO) standards and aims to ensure fair competition. He noted that the EU is not targeting specific nations but is focused on identifying potential distortions in the market caused by external financial support. Chinese authorities argue that the EU is demanding excessive and irrelevant data from Chinese banks as part of its inquiry into JD.com’s acquisition. They claim that the request exceeds the scope of the investigation and could hinder the completion of the deal. Meanwhile, JD.com has reportedly proposed solutions to address the EU’s concerns, suggesting that the parties are nearing a resolution. However, the Chinese government’s public stance raises questions about the impact of its intervention on the transaction’s viability. European lawmakers, including Dirk Gotink, a Dutch member of the European Parliament’s International Trade Committee, warn that Beijing’s involvement could complicate the acquisition process. Gotink suggests that the situation highlights the delicate balance between regulatory scrutiny and diplomatic engagement in cross-border mergers involving major economies. As the negotiations continue, the outcome of these discussions will likely shape the trajectory of Sino-EU trade relations for years to come.