China is trying to convince EU countries to soften the law on supporting European industry

China has launched a diplomatic campaign against the new European law on accelerating industrial development (Industrial Accelerator Act, IAA), which should limit the access of Chinese products to part of the EU market. Beijing has already appealed to Germany and France to prevent the strengthening of “protectionism” in the European Union.

China's Ministry of Commerce on Saturday said it expects Germany to play a "constructive role" and France to play an "active role" in keeping European markets open and resolving trade disputes through dialogue. Chinese Commerce Minister Wang Wentao discussed the situation with German Economics Minister Katherine Reiche, and Deputy Minister Lin Ji met with the head of the French Treasury, Bertrand Dumont. The Chinese side expressed concern about EU investigations into foreign subsidies that affect Chinese companies. Ling Ji also said that the IAA and changes to the Cybersecurity Law could create barriers to trade and investment, as well as disrupt global supply chains.

What is the Industrial Accelerator Act

The bill was approved by the European Commission on March 4. Its goal is to support European manufacturers of “green” technologies: solar panels, batteries, wind turbines and other products that are now largely produced in China. The document proposes to give priority to European products in public procurement of EU countries amounting to more than 2 trillion euros. For certain industries, requirements are introduced for the share of components produced in Europe.

Thus, it is proposed to exclude electric vehicles assembled outside the EU from government procurement within six months after the law comes into force. To be considered “European”, a car must not only be assembled in the EU, but also consist of at least 70% components produced in Europe.

There is a transition period for solar panels: after three years, panels purchased by states will have to use European photocells and inverters. In addition, the bill introduces restrictions for foreign investors in strategic industries. Companies from countries that control more than 40% of global production in a particular sector will not be able to obtain controlling stakes in European enterprises and will be required to share technology with European partners.

The European Commission explains the initiative by the need to reduce dependence on China and return some production to Europe. China controls more than 80% of global production of key solar cell components, according to the International Energy Agency.

Beijing, in turn, considers the new measures a hidden trade barrier. Chinese authorities warn that the restrictions could disrupt global supply chains and complicate trade between China and the EU. The bill still needs to be approved by the European Parliament and among the EU countries, so China is now trying to influence the largest EU economies before the document is finally adopted.