China ties EU foreign subsidies probe to trade talks amid dispute over JD.com deal
China has ordered its companies not to share information with EU investigators in Foreign Subsidies Regulation probes, just as the EU and China enter a critical round of trade negotiations. Brussels insists the rules apply equally to all companies regardless of nationality.
China has pulled the European Union's Foreign Subsidies Regulation (FSR) into its broader trade dispute with Brussels, right as the two sides enter a crucial stretch of negotiations. Beijing's Ministry of Justice has instructed Chinese companies not to hand over information to EU officials investigating under the FSR, the EU's tool meant to ensure players in the single market don't benefit from unfair foreign support.
The notice specifically referenced the European Commission's in-depth investigation into JD.com, the Chinese e-commerce giant seeking to acquire Germany's Ceconomy, parent company of electronics retailer MediaMarkt, in a €2 billion deal.
The move appears designed to raise pressure on Brussels midway through a renewed EU-China trade dialogue. Negotiators are holding intense closed-door talks aimed at narrowing the EU's roughly €1 billion-a-day trade deficit in goods with China. The Commission is expected to hold a videoconference with China's Ministry of Commerce in September, setting the stage for a visit by trade chief Maroš Šefčovič to Beijing in early October, followed by a debrief for EU leaders at a summit days later.
A spokesperson for China's Ministry of Commerce told reporters Thursday that Beijing consistently opposes the EU's use of the FSR to suppress Chinese companies, urging the EU to correct what it called erroneous practices in the investigation and strengthen communication through intergovernmental dialogue, while warning China would closely monitor the EU's actions and take necessary measures to protect its companies' interests.
Commission spokesperson Ricardo Cardoso maintained the FSR fully complies with WTO rules and applies to all companies regardless of nationality, aiming to ensure equal treatment and fair competition in the EU market. Beijing contends the EU has demanded excessive and irrelevant information from Chinese banks as part of the JD.com probe. The Commission is concerned JD.com may benefit from preferential financing, tax incentives and grants from the Chinese government, giving it an unfair edge in the EU market once the deal closes.
JD.com offered remedies this week to address the Commission's concerns, typically a sign talks are at an advanced stage; the company declined to comment. Dutch MEP Dirk Gotink warned that Beijing's intervention could jeopardize the acquisition itself, describing the move as a unilateral escalation.
