The European Commission and associated national enforcement agencies conducted unannounced inspections of the Polish and Dutch subsidiaries of Chinese security scanner manufacturer Nuctech Co (同方威視) on Tuesday last week. The raids were carried out under the EU’s Foreign Subsidies Rule (FSR).
Former Chinese president Hu Jintao’s (胡錦濤) son, Hu Haifeng (胡海峰), was the former chairman of Nuctech, which is regarded as a China-controlled company and was, for a time, listed on the US Bureau of Industry and Security’s Entity List.
Although several countries have raised doubts and issued warnings regarding Nuctech’s security inspection equipment, which includes X-ray machines for baggage and cargo passing through customs, the company has won procurement contracts in several European countries that add up to more than 110 million euros (US$118 million).
For example, the southern Polish city of Rzeszow, which is the main hub for Western arms supplies to Ukraine, last month signed a contract for Nuctech X-ray equipment costing 3.5 million euros. This raises the possibility that China could use the equipment to provide intelligence to Russia. In fact, the Chinese government might well have used such devices’ connections with EU customs declaration systems to obtain substantial data about goods entering and leaving the EU.
Although Europe has long been on the alert about the security issues of Chinese electronic products, when confronted with security concerns regarding 5G devices, EU countries did not have a consistent way of dealing with the issue. Less than half of EU member states have followed the example of the US and Canada by banning Huawei (華為) products. This reveals a difficulty in implementing measures regarding cybersecurity. However, the EU’s decision to base its recent raids on the FSR indicates that it has, within the framework of existing laws, found a tool that kills two birds with one stone: Addressing cybersecurity worries about China while upholding fair market competition and safeguarding the interests of EU businesses.
The huge subsidies that Chinese businesses receive from the government enable them to drastically cut production costs and dump cheap products all over the world, distorting markets and breaching the principle of fairness.
China’s sluggish economy and wilting domestic market have led to excess productive capacity, which is causing worry in Europe and North America. In the past few years, the EU has conducted anti-dumping investigations into various Chinese goods, including electric vehicles, medical equipment, lithium batteries, solar power equipment, components and raw materials.
French lawmaker Antoine Vermorel-Marques has proposed a bill to rein in the “fast fashion” style of business practiced by China-based companies such as Shein and Temu, which is a subsidiary of Pinduoduo (拼多多). The signs are that a trade war between Europe and China could break out at any time.
Taiwan’s market has also been flooded with cheap Chinese goods. Notably, e-commerce merchants source many of their products from China, which is sure to have a negative impact on Taiwanese industry. There are also potential safety hazards, including concerns about national security, cybersecurity and food safety.
Taiwan’s government would be well advised to follow the example of European and North American countries by levying additional tariffs on Chinese goods. This would increase tax revenue, safeguard fair market competition and guard against any malicious intentions that China might have.
Hong Tsun-ming is a specialist in the Taiwan Statebuilding Party’s international section.
Translated by Julian Clegg
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