On September 13, Reuters reported that the European Commission had launched a 13-month regulatory investigation into imports of Chinese electric vehicles, alleging that state subsidies allowed Chinese EVs to outcompete European manufacturers in price.
The Reuters article stated that Chinese imports have increased their share of the European EV market by 8% in the past year, implying that competitive pricing has been a factor in Chinese EVs’ success in the local market.
Chinese ‘enemy’ companies
European anti-dumping investigations against Chinese firms are not unique to the EV market. A quick search reveals that even within this year, a slew of Chinese-manufactured goods, from steel to plastics, have been subjected to European regulatory scrutiny, often with Chinese firms suffering anti-dumping duties at the end of the investigations.
However, European investigations into Chinese firms have become more politically favorable and attract less backlash from business leaders, given ongoing geopolitical tensions stemming from the Russo-Ukrainian war and perceptions among Europeans that the Chinese state is tacitly favoring Russia in the conflict.
The result is a deteriorating perception in Europe of Chinese companies that are either state-owned or perceived to be closely tied to the Chinese state. European skepticism toward Chinese companies comes from the possibility of a hostile Chinese state leveraging Chinese companies in Europe to control the local economy.
Some are more direct, such as fears of Chinese governments’ access to European data in violation of privacy laws. Restrictions on the operations of Huawei and TikTok can both fall into this category.
Others are more indirect, such as a belief in Chinese companies’ dominance of Europe disadvantaging the latter in case of conflicts. Restrictions on EVs, steel and plastics can all be subjected to such interpretations.
Nowhere is the image of Chinese companies’ perception as an instrument of hostility toward Europe more damaging than their involvement in the Chinese government’s Belt and Road Initiative.
Since its launch in 2013, the BRI has become a major foreign-policy initiative for the Chinese government, to enhance China’s stature around the globe by providing extensive financing to infrastructure projects. However, the BRI has also been mired in considerable controversy, due to political and economic sensitivities around many projects, including in Europe.
Belt and Road brand damage
A good case study in Europe is that of China Ocean Shipping Company (COSCO).
The Greek port of Piraeus was partially leased to COSCO in 2009 for 35 years for €100 million per year. Since 2016, COSCO has been the outright majority owner of the port, with the total ownership at 67% in 2021, at the purchase price of €368.5 million, to make Piraeus a major transshipment port for goods between Europe and Asia.
As a result, under COSCO management, the port has experienced major expansion, with the port tripling in capacity and rising from No 77 in 2010 to No 24 in 2020 in the global ranking for container transaction volumes.
However, reduced support for the BRI among European countries has increasingly made it difficult for COSCO to use Piraeus to act on its stated goal of handling European transshipments to Asia. One aspect has been domestic Greek opposition to the continued enlargement of the port.
Locals residing near the port have been battling in local courts over pollution from port operations that threaten local fisheries, as well as suspicions that local government authorities have intentionally overlooked the issues in the name of economic growth.
In March 2022, Greece’s highest administrative court blocked the planned further expansion of the port, pointing to COSCO’s failure to submit an environmental assessment in line with Greek and EU laws.
Even if COSCO smooths out domestic opposition within Greece, its brand image will continue to deteriorate in the wider region as Piraeus becomes enmeshed in other unpopular BRI projects.
For instance, the Budapest-Belgrade-Skopje-Athens railway, conceived as a connector between the port and central Europe in 2013, has been halted until 2019, during which EU regulators examined for signs of irregularities in the tendering process.
The Hungarian government’s failure to disclose the terms of the US$1.9 billion loan for its section of the railway only further deepened suspicions of the EU that China and COSCO are helping to entrench Prime Minister Viktor Orban’s alleged anti-democratic tendencies and lack of anti-corruption reforms.
The result will further weaken COSCO’s image in Europe as a potential disruptor of both commercial and political norms.
In retreat
In response to political opposition, involvement of the BRI and the Chinese government in Europe is in retreat. Cooperation between China and Central and Eastern European countries, a cooperation format that sponsors the Budapest-Belgrade railway, has been weakened by the withdrawal of the three Baltic states by 2022.
Recent news that Italy, the only G7 country officially to sign up to the BRI, is considering withdrawing from the initiative further points to the possibility of a reduced role for the Chinese state in European investments soon.
Yet the retreat of the Chinese state is expanding new opportunities for Chinese companies like COSCO to improve their image through multilateral cooperation.
In a September 2022 interview, Greek Prime Minister Kyriakos Mitsotakis noted that the Piraeus port investment a decade ago was in a “different time” when “no one wanted to invest in Greece,” and opined that no major new Chinese investments in Greece are on the horizon. But only a year later, greater use of the port topped the agenda of a state visit to Greece by Indian Prime Minister Narendra Modi.
The willingness of India to designate a majority Chinese-owned port as a key conduit to expand European exports shows that Chinese companies, extricated from suspicions of working with the Chinese state, can still increase their commercial footprint in Europe.
Of course, it remains to be seen whether any reduction in the visibility of the Chinese state in Europe can bring lasting respite for Chinese companies operating on the continent. Part of the reduced attention to COSCO may be that Piraeus is no longer growing in transaction volume and thus reduced in commercial importance.
But as the likes of COSCO, Huawei and TikTok actively advertise and market their presence in Europe, it is not a foregone conclusion that they will not again face concentrated media and popular hostility. And when that day comes, their alleged links with the Chinese state, both real and imagined, may once again hurt their brand image.