EU raids offices of Chinese security equipment maker in subsidy probe

EU raids offices of Chinese security equipment maker in subsidy probe

European Union officials have raided the offices of Chinese security equipment maker Nuctech as part of an investigation into subsidies, exposing growing tensions between the bloc and one of its biggest trading partners.

The European Commission said on Tuesday that it was carrying out “unannounced inspections” at the premises of a company that makes and sells security equipment in Europe, which it suspects may be benefiting excessively from state subsidies. It did not name the company.

“The commission has indications that the companies under investigation may have received foreign subsidies that could distort the internal (EU) market,” the EU’s executive body said in a statement on its website.

Late Wednesday, Nuctech confirmed to CNN that its offices in Poland and the Netherlands are under investigation. The firm makes baggage security scanners for airports and other equipment. In 2020, the US government added Nuctech to a list of entities subject to stricter license requirements “for its involvement in activities contrary to the national security interests of the United States.”

Nuctech said in a statement: “Nuctech cooperates with the European Commission and is committed to maintaining its reputation as an independent and fully self-sustaining economic operator.”

The China Chamber of Commerce to the EU, whose members include Chinese state-owned and private firms, expressed “strong dissatisfaction” over the raid, which it said was carried out “without prior notice and without solid evidence.”

“The European side expressed its intention to weaponize the Foreign Subsidy Regulation as a tool to restrict Chinese companies operating legally in Europe,” the lobby group said in a statement.

In response, a spokesperson for the European Commission told CNN that officials are conducting unannounced inspections based on “strong indications” that the company may have been granted “disturbing foreign subsidies that benefit its activities in the EU.”

“The inspection is an investigative measure that never evaluates the results of the commission’s investigation,” the spokesman added.

The raids – the first under the EU’s new powers against excessive foreign subsidies – follow investigations recently launched by the bloc into Chinese state support for its wind turbine firm and for Chinese companies bidding for solar farm contracts in Romania.

The Foreign Subsidies Regulation, which came into effect last July, aims to tackle market distortions caused by subsidies from foreign governments and ensure EU companies compete on a level playing field.

Tuesday’s raid also came on the same day the president of the European Commission said the Group of Seven advanced economies was starting work to tackle imports resulting from “structural overproduction” elsewhere, “overproduction achieved largely through subsidies, massive subsidies.”

“We have to be very careful that our producers do not risk being forced out of the market,” said Ursula von der Leyen in her speech. Although he did not mention China, there is growing evidence of tensions between the world’s biggest producer and its main trading partners, including the EU and the United States, over an oversupply of cheap Chinese goods on foreign markets.

“We are engaging with our G7 partners on this topic, as it is a common concern,” an EU official told CNN Wednesday, adding that the issue will be discussed at a summit of G7 leaders in Puglia, Italy, in June.

China’s global trade surplus in goods has surged in recent years and is now approaching $1 trillion.

During a visit to China earlier this month, US Treasury Secretary Janet Yellen warned of risks to jobs and businesses in the United States and elsewhere posed by overproduction of certain goods in the world’s second-largest economy. The message is clear: China’s soaring exports of electric vehicles, solar panels and batteries must be curbed.

US Secretary of State Antony Blinken, who is currently visiting the country, raised concerns on Thursday about China’s trade policies and “non-market economic practices” in a meeting with Shanghai Party Secretary Chen Jining, according to a US government spokesman.

Those concerns were voiced by G7 foreign ministers at a meeting in Italy last week. “We are concerned that China’s non-market policies and practices are leading to dangerous overcapacity that harms our workers, industry and economic resilience,” they said in a statement.

Beijing, for its part, sees exports as a key step in revitalizing China’s slowing economy. It’s getting smaller focus on higher-value exports in industries that Europe and the United States see as strategically important as they seek to green their economies.