(Yicai) July 10 -- At the request of a Chinese industry association, China has begun a probe into the European Union’s practices in its investigations of Chinese companies based on the bloc’s regulations on tackling distortive foreign subsidies.

The investigation will look at the EU’s recent actions against Chinese companies, which were launched as part of its Foreign Subsidies Regulation, China's commerce ministry said today.

The June 17 application by the China Chamber of Commerce for Import and Export of Machinery and Electronic Products mainly involved products such as rolling stock, photovoltaics, wind power and security inspection equipment, the ministry said.

The ministry plans to complete the investigation by Jan. 10 of next year, with an extension to April 10 in exceptional circumstances.

The EU’s FSR is not based on international multilateral trade rules, but is a self-created tool that discriminates against Chinese companies, media outlet Global Times cited Ji Wenhua, a professor at the University of International Business and Economics, as saying.

It is an exaggerated extension of the World Trade Organization’s concept of countervailing duty, Ji said, adding that the criteria are vague and the enforcement procedures are non-transparent and unfair, thus creating many obstacles for Chinese businesses to invest in the EU and participate in government procurement.

The report also quoted Zhou Xiaoyan, vice president of the China Council for International Investment Promotion, who said the EU’s investigation collects a lot of sensitive business data, which affects data security and seriously interferes with the investment and business activities of Chinese firms in the EU.

It also raises concerns about the EU’s business environment, and raises barriers to China-EU economic and trade cooperation, Zhou noted.

The FSR came into force in January 2023 to combat distortions of competition in the EU market caused by foreign subsidies.

Since this February, it has been used to target Chinese firms such as rolling stock maker CRRC Qingdao, which was forced to withdraw from bidding for a EUR610 million (USD660 million) project in Bulgaria.

Shanghai Electric and Longi Green Energy were also forced to suspend their bids to participate in a solar park in Romania. And the offices of the Chinese security company Nuctech in Poland and the Netherlands were raided.

Editor: Tom Litting