The European Union has initiated an investigation into China’s procurement of medical devices. This is just one of many actions causing tension as President Xi Jinping prepares for his first visit to the bloc in five years. The probe aims to address worries that China is unfairly favouring domestic suppliers. This isn’t the EU’s first inquiry into Chinese business practices, with previous investigations into government backing for electric car manufacturers and other industries like wind energy, solar and railways.
The EU’s relationship with Beijing has been strained over the past year due to Europe’s assertive response to China’s trade policies. European leaders have voiced their concerns about China’s increase in manufacturing capacity, large trade surplus, and support for Russia’s invasion of Ukraine. The new probe is the first use of the EU’s International Procurement Instrument, a law implemented in 2022 to foster reciprocity in access to public procurement markets.
Details of the Investigation
The investigation, which was first reported by Bloomberg last week, will initially concentrate on gathering information from companies and member states. Following this, authorities will begin discussions with Beijing on fair and open markets. The investigation must be completed within nine months. If the EU identifies a lack of reciprocity in procurement markets, it could potentially restrict Chinese access to the bloc’s tenders. However, if talks with Beijing result in significant corrective actions, the investigation could be suspended at any time.
According to the EU, Beijing has been promoting market-distorting measures and practices to achieve its “Made in China” policy. The goal is to achieve an 85% domestic market share for Chinese companies manufacturing “core medical device components” by 2025. The target is 70% for high-end devices. The EU also alleges that the Chinese government discriminates against imported products and has occasionally imposed stringent requirements on foreign firms.
China’s Changing Medical Technology Market
China’s focus on local and state-oriented procurement in medical technologies has increased in recent years. Authorities across the country have implemented strict domestic product requirements for many categories of devices. This shift has transformed a €1.3 billion ($1.4 billion) trade deficit in these goods for China in 2019 into a €5.2 billion ($5.5 billion) surplus just one year later, according to data cited in an EU report published earlier this month.
Other EU Actions
In another move this week, EU watchdogs raided the European premises of a security equipment company under new anti-subsidy laws. Nuctech, a state-owned company known for manufacturing baggage inspection devices used in airports worldwide, confirmed to Bloomberg that it was “fully cooperating” with the EU but did not confirm if it was inspected. In 2020, the U.S. government warned European governments against using Nuctech’s devices, citing security risks.
Market Access
The EU’s access to China’s procurement market has been a long-standing issue. Both European Commission President Ursula von der Leyen and the bloc’s trade chief Valdis Dombrovskis raised the issue during their trips to China last year. “Regrettably, our repeated discussions with China on this trade irritant have been fruitless,” Dombrovskis said Wednesday in a statement.
Further Strains
Adding to the tension, four people were arrested in Germany this week on accusations of spying for China. Three were detained on suspicion of working for Chinese state security to acquire industrial secrets, while another person was arrested in connection with spying on the European parliament and Chinese opposition figures.
China’s foreign ministry hit back at the spying arrests. “I hope that relevant people in Germany will ditch the Cold War mentality and stop manipulating political narratives against China by raising this so-called spy risk,” spokesman Wang Wenbin said Tuesday.
The US and EU Align on China
The EU’s approach aligns with a firmer U.S. stance against China. U.S. Treasury Secretary Janet Yellen told Chinese leaders during her visit last month that the country’s ramped-up factory output has become a global problem. The U.S. won’t take “anything off the table,” including the possibility of additional tariffs, to stem the flood of Chinese goods, she told CNN earlier this month.
