On Monday (October 28), the Chinese Ministry of Commerce issued a warning to the European Union and Chinese electric vehicle companies engaged in separate negotiations, stating that it would shake mutual trust. The European Commission pointed out that eight rounds of technical negotiations had been held between the EU and China on electric vehicles, but there are still “significant differences” between the two sides.
Experts analyzed that the electric vehicle industry has been militarized by the Chinese Communist Party, and the EU’s desire to negotiate separately with electric vehicle manufacturers is met with Chinese fears of economic and even political secrets being exposed. The EU is clear that if China monopolizes the electric vehicle industry chain, it will pose geopolitical and economic risks. Therefore, the EU is unlikely to back down, and it is anticipated that the negotiations between the two sides may end without agreement.
According to a report by Reuters on the 28th, earlier this month, the Chinese Ministry of Commerce had issued a similar warning. Several days after China and the EU agreed to continue technical negotiations on possible alternatives to tariffs on Chinese electric vehicles, the Chinese side issued another warning.
Regarding the European Commission’s statement that the EU “is negotiating price commitments with the China Chamber of Commerce for import and export of machinery and electronic products and does not exclude other companies negotiating price commitments with the EU separately,” the Chinese Ministry of Commerce responded on its official website on the 28th.
A spokesperson for the Chinese Ministry of Commerce stated that if the EU conducts price commitment negotiations with certain companies separately while negotiating with China, it “will shake mutual trust, disrupt the overall negotiation process, and increase administrative costs for the subsequent implementation and supervision of the price commitment agreement.”
A commentary posted on the Weibo account “Yuyuan Tan Tian” under CCTV on the 27th mentioned that before the final ruling date, the EU may send officials to visit China for further negotiations on price commitments.
Regarding why the EU wants to negotiate separately with Chinese electric vehicle companies, veteran commentator Tang Jingyuan told Dajiyuan that the main reason is that the EU still views these Chinese electric vehicle companies as products of a market economy, which he believes is wishful thinking.
Tang Jingyuan believes that the Chinese government will definitely not agree because the entire electric vehicle industry has been militarized by the Chinese Communist Party, serving as an economic engine domestically and a means of economic expansion internationally.
Tang Jingyuan said, “China wants to dominate the electric vehicle industry and crush other electric vehicle companies worldwide as a means of monopolizing the global electric vehicle market. Therefore, the export prices of these Chinese electric vehicle companies are not determined by themselves but completely controlled and monopolized by the Chinese government.”
In this context, it is unlikely that the EU will be able to negotiate separately with Chinese car manufacturers.
Analyst Arushi Kotecha from the Economist Intelligence Unit (EIU) told the BBC that electric vehicles involve the latest technologies in lithium-ion batteries and semiconductors, as well as vehicle-assisted driving components (such as laser radar), with high economic value crucial for economic growth.
Professor Xie Tian from the University of South Carolina told Dajiyuan that he also doubts that China will allow the EU to negotiate separately with electric vehicle manufacturers, as China even falsifies its national economic data, why would it allow Europeans to really uncover issues such as genuine overcapacity and subsidies, revealing the truth behind this may lead to sensitive economic and even political secrets. Consequently, for China, the consequences might be unimaginable, so it is unlikely to agree, and the negotiations between the two sides may end in a stalemate.
Senior Chinese economist Lin Haobo recently told Voice of America that Beijing monopolizes part of the global industrial chain, leading to a high level of trade dependence on China. Taking electric vehicles as an example, China monopolizes about 70% of the global lithium manufacturing industry to ensure its advantage in electric vehicle production, also hoping that electric vehicles will be a new growth engine amidst economic difficulties.
Addressing the recent eight rounds of technical negotiations between the EU and China, with “significant differences” still existing, Tang Jingyuan analyzed that it is obvious that China’s illegal subsidies have created a huge unfair trade situation, involving market access and reciprocity issues. The market access conditions for electric vehicles produced by the EU to enter the Chinese market and those produced by China to enter the EU market are mismatched and unequal.
“So when Chinese electric vehicles are exported to the EU, it essentially becomes a form of economic aggression.”
“We can also see that China is now monopolizing key components and technologies in the electric vehicle industry through government investment. From the EU’s perspective, it will worry about having to rely on China in the future, posing significant geopolitical and economic risks behind this situation,” Tang Jingyuan said.
North American senior commentator Lan Shu told Dajiyuan that the electric vehicle industry involves batteries, which are a high-tech industry connected to the future of the entire energy industry. Electric vehicles are just the final product, involving many different industry chains. Therefore, to protect the future of the entire European economy comprehensively, the EU will definitely not compromise on this issue.
According to a report by the Kiel Institute for the World Economy in Germany published in April, China heavily subsidizes domestic industries. For example, BYD, an electric vehicle manufacturer, received over 2 billion euros in government subsidies from 2022, making its international competitiveness grow significantly. BYD also benefits from government subsidies to battery manufacturers and vehicle purchase subsidies.
Commentators noted that China’s subsidies not only lead to unfair competition but also serve strategic purposes. The total amount of China’s subsidies is three to nine times that of advanced countries such as the United States or Germany.
Nikkei Asia reported that despite production capacity far exceeding domestic demand, Chinese electric vehicles are expanding at an astonishing rate, with nearly 20 million vehicles of excess capacity estimated for next year. This has heightened global concerns, as Chinese electric vehicles exported abroad are expected to engage in cutthroat low-price competition.
Regarding the massive financial subsidies by the Chinese authorities leading to overproduction, Lan Shu believes that China is essentially targeting the entire EU electric vehicle industry market comprehensively, with the strategy that China is the world’s factory, meaning that everything in the world has to be produced in China, a concept that is entirely absurd.
Lan Shu specifically mentioned that currently, China is using its economy to support the war between Russia and Ukraine, meaning that the development of China’s economy has created security considerations for all EU countries. Consequently, the EU will find it even harder to make compromises.