European trade officials have requested industry data that could allow the European Union to challenge China over cheap credit to Chinese firms, according to EU officials and correspondence seen by Reuters.
The initiative, led by the EU executive, the Commission, and Europe’s largest business group, BusinessEurope, highlights Europe’s determination to face down what EU businesses and officials say is unfair competition from China that is costing European firms lost contracts around the world.
“EU authorities will need, from those ready to contribute, concrete evidence of cases where favourable Chinese export credits and guarantees seem to have led to a distortion of competition,” said a BusinessEurope email dated Jan. 6 and obtained by Reuters. EU firms were asked to reply by Jan. 28.
“BusinessEurope and EU authorities are interested in getting in contact with interested associations and in particular with companies that are directly affected due to their competition with Chinese companies that benefit from Chinese export credits and guarantees.”
A challenge to Chinese financing could further hurt EU-China relations, bruised by disagreement over currency and human rights, at a time when China has offered support for indebted European countries such as Greece and Portugal.
It could also make it harder for European firms to do business in China.
The EU vowed to hunt down any illegal Chinese practices in a trade agenda unveiled late last year.
“As we have said, we will look more closely at these things,” said an EU official when asked about the correspondence.
EU trade spokesman John Clancy said: “The Commission and EU member states are very concerned by the increased amount of cases where EU Export Credit Agencies ... cannot match the credit terms of countries that are not bound by (export credit rules), such as China.
“We are raising this issue in our high-level dialogues to the highest level,” he added. He declined to comment on the emails.
Industry data gathered by the EU Commission last year showed Chinese firms are underbidding EU rivals for big infrastructure projects, hurting EU energy, telecoms and transport developers, according to a BusinessEurope email dated Nov. 9, 2010.
Citing industry data, it blamed low Chinese insurance premiums, long repayment terms with long grace periods and “very favourable—low or subsidised—interest rates”.
Such cheap loans have cut European firms out of lucrative contracts across Africa, Southeast Asia, Eastern Europe, Russia and Latin America, the email said.
The EU is bound by rules on export credits under an OECD agreement that China has not ratified.
The only way to challenge such credits would be to prove they are being granted at below market rates, which would turn them into export subsidies forbidden by the World Trade Organization.
“We are aware of a number of concerns in that area, notably as China is not bound by OECD guidelines on export credits,” said a spokesman for BusinessEurope.
He declined to comment on the content of the emails.
Separately, the Commission is testing EU industry support for lodging a legal case at the WTO against China over possible subsidies for the production of environmental goods and technologies.
The United States last month took first steps to lodge such a case, asking for formal talks with China at the WTO.
EU firms were given until Dec. 10 to file evidence that Chinese trade and finance practices are hurting profits, and the Commission is assessing the data, an EU official said. (Reuters)