Bloomberg（英文）：（赵永升） ‘Stakes Are High’ as China Has Tools to Strike Back at EV Curbs
（来源：Bloomberg（英文） 2023-09-15）
European probe into Chinese EV subsidies may lead to tariffs
Beijing may choose to retaliate by cutting access to minerals
The European Union launched an investigation into Chinese subsidies for electric vehicles this week, highlighting the growing industrial and geopolitical competition between the two economies.
The probe may ultimately lead to import tariffs on Chinese vehicles, drawing sharp rebuke from Beijing, who called the move a blatant act of protectionism. There are also concerns that Beijing may retaliate against any trade curbs.
Here are the waysChinacould hit back at the possible tariffs:
Restrict Trade and Market Access
The most powerful tool Beijing can wield is restricting access to its huge domestic market.Chinais the world’s largest car market, and while foreign car manufacturers are losing market share, German car companies are still very reliant on revenue fromChina. German brands sold 4.6 million cars in the Asian country last year and other European Union members sold about 283,000 units.
Beijing could impose retaliatory tariffs on imports from Europe, but the impact wouldn’t go far. Most of these vehicles are made inChinaand such a move could exposeChinato World Trade Organization action. The EU could also use its new anti-economic coercion tool, which allows possible countermeasures such as tariffs and restrictions on access to foreign direct investment.
Should Chinese consumers decide to boycott European car companies — just as they did in the past with Japanese and Korean cars when there were geopolitical disputes — sales would take a hit. A consumer boycott has the advantage of being harder to prove that it’s the result of government action.
South Korean Cars Sales Slumped in ChinaAfter Thaad Dispute
Sales in the first seven months of this year were the lowest since at least 2008
Source:ChinaAutomotive Technology and Research Center
Beijing could also retaliate against other European product exports. Duncan Wrigley, chiefChinaeconomist at Pantheon Macroeconomics, saidChinais likely to target luxury goods, cosmetics and wine.
In the case ofAustralia,Chinaimposed curbs on a range of goods including barley, wine, lobster, beef, timber and coal when its relations with Canberra took a nosedive in 2020. Those restrictions are only now being gradually lifted.
In 2013, a day after the EU imposed tariffs on imports of solar panels fromChina, Beijing launched anti-dumping and anti-subsidy probes into wine imports from the EU and threatened another probe against luxury cars. Those actions were eventually dropped after the two sides resolved the dispute.
After news of the latest EV probe, Beijing said Thursday it will maintain anti-subsidy duties on potato starch imported from the EU for five years.
What Bloomberg Economics Says ...
“InChina’s manufacturing, EVs are still relative small fry. But the industry’s rapid expansion, innovation and advanced manufacturing techniques hold promise for future economic growth. It’s also supporting other sectors — when the economy is short on growth drivers. EU tariffs on Chinese EVs would hurt.”
— Eric Zhu and David Qu, economists
Read the full report here.
Restrict Exports
China is the EU’s biggest trading partner and the 27-nation European bloc is reliant onChinafor supplies of various critical minerals.
One way Beijing could retaliate against any EU action would be to limit access to rare earths, which go into the making of not only batteries but other electronic components, said Ja Ian Chong, an associate professor of political science at the National University of Singapore, who has written on Chinese economic coercion.
China temporarily restricted exports of rare earths toJapanin 2010 during a dispute, but hasn’t used that tool recently. In July, Beijing started to license exporters of two metals — gallium and germanium — that are used in making chips, EVs and telecommunications equipment, prompting concern it could start cutting back on shipments.
Battery Arms Race
TheUShas a long way to go if it wants to challengeChina's dominance in battery component manufacturing and metals refining capacity
Source: BloombergNEF
Note: By factory location. Nickel is the Class 1 variety and lithium is lithium carbonate equivalent. Data as of October 2022.
If the tariffs levied by the EU are too high, “Chinawill certainly take measures on rare earth supply,” said Zhao Yongsheng, a professor at the University of International Business and Economics in Beijing. “It’s highly unlikely thatChinawould just watch and let it go.”
China has a dominant position in the production of batteries and critical minerals such as lithium and rare earths. EU demand for lithium could surge up to 18 times by 2030, and 60 times by 2050, according to a 2022 report from the European parliament. The EU mines only a small fraction of the lithium it consumes, and relies onChinato process it.
Read more: Hungary Sees €3 Billion in New Chinese Car Industry Investment
However, Chinese firms such as battery maker Contemporary Amperex Technology Co. are rapidly ramping up investment in Europe, so any restrictions on exports to Europe of battery-related materials could damage Chinese firms just as much as European companies.
Tourism Ban
Another retaliatory toolChinahas used in the past is to restrict tourism to inflict economic punishment. When Beijing had a dispute with Seoul over the deployment of aUSmissile defense system known as Thaad, there was a tacit ban on Chinese tour groups going toSouth Korea. Tour groups are still banned from visitingTaiwan.
Chinese Tourism to Europe Hasn't Recovered From Covid Yet
Which will limitChina's ability to use this as a weapon
Source:ChinaOutbound Tourism Research Institute
Before the pandemic, millions of Chinese tourists visited Europe each year, but the slow recovery sinceChinareopened its borders earlier this year means it’s not as potent a tool as it might otherwise be.
‘Breathing Space’
The EU probe is likely to take about nine months, andChinaprobably won’t act before Europe does.
The investigation reflects a desire to ease the rate of transition to EVs, especially for economies that have built a reputation and ecosystem for traditional vehicles — particularlyGermany, said Deborah Elms, executive director at Asian Trade Centre inSingapore.
“That either postpones the inevitable a little longer or gives firms breathing space to retool themselves for this new competition,” Elms said. “The stakes are high for everyone. This is going to be a very contentious period.”
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