European Union Begins Regulation on China's 'Cross-Border Subsidies'... "Korean Companies Should Also Take Caution"

China's Belt and Road Initiative Targets Subsidies for Overseas-Based Companies

[Asia Economy Reporter Jin-ho Kim] The European Union (EU) has taken active measures such as imposing 'countervailing duties' after determining that subsidies paid by China to its overseas-based companies distorted fair trade. Consequently, concerns have been raised that Korean companies should also be cautious about the potential expansion of related regulations.

According to the 'EU Intensifies Countervailing Duty Measures on Cross-border Subsidies' report released on the 9th by the Korea International Trade Association's International Trade and Commerce Research Institute, the EU Commission decided in March to impose countervailing duties of up to 21.4% on Indonesian stainless steel cold-rolled products.

The Chinese companies based in Indonesia under investigation received subsidies from the Chinese government, and the EU judged that 'cross-border subsidies' provided by a third country (China) to exporters (Indonesia) are also subject to countervailing duties.

This is the third time the EU has imposed countervailing duties on cross-border subsidies, following cases involving Egyptian woven and stitched glass fiber products and continuous filament glass fiber products in 2020. The commonality among these cases is that China provided subsidies by investing in Chinese companies located in economic and trade cooperation zones of Belt and Road Initiative participant countries, and the products manufactured by these companies were exported to the EU.

Indonesia designated the Morowali Industrial Park as an economic and trade cooperation zone to develop its domestic industry and strengthened cooperation with China. Indonesia offered preferential measures such as tax reductions, while China supported investment funds for its domestic companies. Based on this, the Morowali Industrial Park established an integrated industrial base from nickel mining to stainless steel products. The EU recognized the financial contributions made by the Chinese government during this process as cross-border subsidies and imposed countervailing duties on Indonesian stainless steel cold-rolled products.

Senior Researcher Kyunghwa Kim of the Korea International Trade Association advised, “Not only the EU but also the United States is showing regulatory movements by addressing subsidies paid by China offshore and preparing legislation. Although the possibility of overseas Korean companies being subject to these regulations is expected to be low, continuous monitoring of the strengthening and expanded application of cross-border subsidy regulations is necessary.”

This content was produced with the assistance of AI translation services.