The European Union is preparing to intensify its investigations into foreign subsidies received by non-EU companies operating in the bloc, amid rising trade tensions with China and growing concern over market distortions across key industrial sectors.
The announcement came from Teresa Ribera, Executive Vice-President of the European Commission and Commissioner for Competition Policy, during her official visit to Beijing. In an interview with the Financial Times, Ribera confirmed that Brussels would make broader use of the Foreign Subsidies Regulation (FSR)—a legal tool that empowers the Commission to probe and potentially block commercial activity by foreign-backed firms whose state support may distort fair competition within the single market.
“Of course,” Ribera said when asked whether more investigations were imminent. She pointed to a “broad spectrum” of sectors attracting foreign investment—including chemicals, pharmaceuticals, automotive manufacturing, and battery production—as likely targets for future scrutiny.
The FSR, which took effect in mid-2023, is designed to address a long-standing regulatory gap in EU competition law, enabling the Commission to examine foreign subsidies in merger control, public procurement, and other commercial transactions. Although the regulation is formally country-neutral, Chinese firms have dominated recent enforcement activity.
So far, the Commission has launched investigations into Chinese companies in multiple sectors: electric vehicle maker BYD, a state-owned rail manufacturer, a solar panel supplier, a security scanner firm, and producers of wind turbines. These cases reflect what EU officials describe as a systemic imbalance caused by China’s industrial policy, which they say leads to overcapacity, artificial price suppression, and the erosion of European industrial competitiveness.
The latest developments come as Ribera co-chairs the Sixth EU–China High-Level Environment and Climate Dialogue in Beijing, alongside Chinese Vice-Premier Ding Xuexiang. The meeting is aimed at advancing climate cooperation, even as economic relations are strained by subsidy disputes, trade deficits, and broader geopolitical frictions—including China’s continued alignment with Russia.
In parallel, preparations are underway for a high-profile summit between European Commission President Ursula von der Leyen and Chinese President Xi Jinping, scheduled for later this month to mark the 50th anniversary of EU–China diplomatic relations. Expectations for major breakthroughs remain low, with European officials calling for more concrete commitments from Beijing—both on climate action and market liberalisation.
During her visit, Ribera drew a pointed comparison between current EU ambitions and China’s historical requirements for foreign investors. She noted that Beijing once encouraged joint ventures with foreign firms to stimulate domestic innovation and technology transfer. Europe, she suggested, may pursue similar strategies to ensure that incoming investment supports the long-term development of its own innovation ecosystem, rather than simply flooding the market with subsidized goods.
“There’s room to develop these types of joint ventures also in Europe,” Ribera said, “but without risking getting trapped in a context where innovation and knowledge may be absent and we could only get products to the markets.”
In addition to ramping up enforcement under the FSR, the Commission is pursuing “Buy European” policies, aimed at strengthening domestic supply chains in strategic sectors and reducing dependency on foreign suppliers benefiting from non-market advantages.
While economic tensions have flared, Ribera emphasized that climate cooperation with China remains possible—particularly as the EU seeks to fill the leadership void left by a retreating U.S. on multilateral climate policy in recent years. Chinese officials, she said, still view their role in the Paris Agreement as part of their international legacy, providing a potential foundation for ongoing engagement.
Still, divisions persist. EU officials have rejected a recent Chinese proposal for a joint climate declaration at the upcoming summit, insisting that any such move must be accompanied by more ambitious and transparent emissions reduction commitments from Beijing.
As the European Union steps up its use of trade defense instruments—including the FSR and procurement rules—it appears increasingly determined to reshape its relationship with China. The strategy reflects a careful balancing act: welcoming investment and climate cooperation, while asserting tighter regulatory control over the conditions under which foreign players can compete within Europe.
