EU's FSR enforcement to harm bilateral business ties

China's business community has expressed mounting concern over the European Commission's use of the Foreign Subsidies Regulation (FSR), with experts warning that the move could distort competition and strain economic relations between China and the European Union.

The concerns follow a decision by the European Commission — the EU's executive arm — requiring a consortium to replace a subcontractor over an alleged distortive foreign subsidy.

The case involves Portugal CRRC Tangshan Rolling Stock Unipessoal, a subsidiary of State-owned CRRC Tangshan Co in Hebei province.

The consortium participated in the tender process launched in April 2025 by Metropolitano de Lisboa, Lisbon's metro operator, for a contract to design, construct and maintain the new "Violet Line", according to a statement released by the European Commission.

The commission claimed that Portugal CRRC "may have received foreign subsidies", and accepted commitments made by the consortium to replace the Chinese company with a Polish rolling stock manufacturer.

The Brussels-based China Chamber of Commerce to the European Union, or the CCCEU, voiced strong opposition on Tuesday to the EU's decision to exclude a Chinese company from a public procurement project in Portugal, citing an alleged distortive foreign subsidy.

The chamber said the Chinese company participated only as a subcontractor, with its contract accounting for less than 10 percent of the project's total value — well below levels typically seen as conferring material influence.

Against this backdrop, the CCCEU questioned the basis for classifying the subcontractor as "critical" and the justification for the corrective measures imposed.

The chamber also criticized the investigation, saying tight deadlines of just two to three days for complex submissions failed to reflect cross-border compliance challenges, undermining the company's rights to defense and due process.

The CCCEU represents more than 100 members and chambers in the EU member states, covering over 1,000 Chinese companies, including Bank of China (Luxembourg) SA and China Three Gorges (Europe) SA.

Amid growing scrutiny of Chinese companies under the FSR, China's Ministry of Commerce said in February that the European Commission had repeatedly used the FSR to target Chinese companies, including by escalating probes into wind power and security equipment firms, describing the practice as discriminatory and expressing strong dissatisfaction.

Peng Bo, a researcher at the Chinese Academy of International Trade and Economic Cooperation, said the EU's definition of foreign subsidies is ambiguous, often categorizing normal business operations or widely accepted commercial practices as subsidies.

Investigations by the European Commission have involved excessive information demands, often within unreasonably short timeframes, said Peng.

"The process has lacked transparency, with Chinese companies denied basic rights such as access to information and the ability to mount a defense," he said.

Such measures, he added, could harm China-EU economic ties and undermine Chinese companies' confidence in investing in the EU market.

Ding Chun, director of the Center for European Studies at Fudan University in Shanghai, said China-EU economic ties are shifting from trade disputes to deeper rule-based competition, as geopolitical pressures drive institutional adjustments and reshape bilateral interactions.

The EU is expanding use of trade defense tools, including anti-dumping, anti-subsidy measures and the FSR, extending scrutiny into emerging sectors and upstream activities, while longer review cycles raise compliance costs for Chinese companies, Ding said.

zhongnan@chinadaily.com.cn