FSR Damages China-EU Economic Ties

Dawn raids on a Chinese digital platform and frequent probes into Chinese enterprises are some of the measures taken by the European Commission (EC) under the new EU Foreign Subsidies Regulation (FSR), China's Ministry of Commerce said.

The targeted companies include CRRC, leading Chinese locomotive manufacturer, and advanced security & inspection solution supplier Nuctech, which were subjected to an in-depth investigation.

These actions are egregious and discriminatory in nature, evidently targeting Chinese companies.

China is closely monitoring these moves by the EU and will take necessary measures to safeguard the legitimate rights and interests of Chinese enterprises.

The FSR, which took effect in July 2023, requires enterprises participating in EU public tenders or merger and acquisition transactions exceeding certain thresholds to notify the EC about any foreign subsidies they receive. The EC can launch in-depth investigations based on notifications or initiate ex-officio investigations independently.

Although the FSR claims to be country-neutral, its enforcement has shown strong targeting and discriminatory bias.

In-depth investigations primarily target Chinese enterprises, with very few cases involving companies from other countries.

According to Dutch law firm Houthoff, during the two-year implementation of the FSR, the EC received over 2,100 public procurement notifications, but initiated only three in-depth investigations based on these notifications.

All three were Chinese technology companies in new energy, transportation equipment and related fields, and were forced to withdraw from tenders post-investigation.

In addition, the EC launched two ex-officio investigations targeting Chinese wind turbine and security scanner suppliers.

In December, the EC conducted a foreign subsidies investigation into a Chinese e-commerce platform and conducted dawn raids at the enterprise's European headquarters in Ireland.

Reports also indicate that the EU is conducting similar investigations into Chinese electric vehicle manufacturers.

Additionally, the FSR does not clearly define which foreign subsidies would distort competition in the EU market.

In October 2024, the global law firm Hogan Lovells released a report stating that the breadth of the FSR, lack of transparency, and the EC's wide discretion mean there is significant uncertainty in terms of the EC's objectives and how the relationship between subsidies and the market is defined.

The FSR has severely damaged the EU business environment and significantly disrupted the normal operations of multinational enterprises, particularly Chinese enterprises within the EU.

China's Ministry of Commerce estimates that FSR enforcement has already led to direct and indirect losses valued at approximately 2.1 billion EUR. A 2025 survey by the EU's China Chamber of Commerce found that over 63 percent of its members have been directly or indirectly impacted by FSR procedures, with half citing concerns over reputational risk.

In addition to the targeted suppression of Chinese enterprises, the implementation of the FSR has put significant administrative pressure on companies from other countries operating in the EU as well.

In July last year, the international law firm White & Case stated that the FSR compliance places a heavy burden on internal corporate resources and constitutes a burdensome compliance obligation on these enterprises.

Even when a subsidiary has no connection to its EU transaction in question, the notified enterprise must disclose all foreign subsidies received by all subsidiaries. The data collection process is complex, time-consuming, and requires substantial work.

In December 2024, the Washington, D.C.-based law firm Crowell and Moring pointed out that the FSR's notification requirements encompass not only foreign subsidies, but also include loans, capital injections, debt relief, tax breaks and more, making it a daunting task for any company engaged in international operations.

As a major global economy, the EU should uphold fair and open trade, but has instead built discriminatory barriers against Chinese enterprises. Cooperation with China is vital for the EU's energy transition and supply chain security. Excluding Chinese enterprises harms mutual interests.

The EU should ensure a just, equal, and transparent business environment, avoiding damage to China-EU economic relations through regulations like the FSR.

Source: Science and Technology Daily