China probes dairy imports following EU's EV probe update

China said Wednesday that it has launched an anti-subsidy investigation into dairy imports from the European Union, just after the EU took another step forward in its own probe of low-priced electric vehicles subsidized by Beijing.

The European Commission on Tuesday had published a draft decision updating its EV tariffs, which China swiftly slammed as "practicing unfair competition." Beijing reiterated its vow to take all necessary steps to defend the "legitimate rights and interests" of its companies.

Hours later, a statement posted on the Chinese Ministry of Commerce website said the dairy probe will look into imports produced one year ago through March 31, 2024, in response to complaints from industry associations. The investigation will cover various cheese, milk and cream products from eight European Union countries including Austria, Belgium, Finland and Italy. Affected countries have been asked to respond within 20 days to the probe, which is slated to last a year.

The move appeared to be a riposte to the EC's publication of updated proposed duties on Chinese EV brands in a range of 17% to 36.3%, slightly lower than the range of between 17.4% and 37.6% announced last month.

"The disclosure did not fully take into account opinions of the Chinese side, and still insisted on its wrong approach by imposing a high tax rate," China's commerce ministry had said late on Tuesday. Beijing stressed that it and EV players had provided "tens of thousands of pages of legal documents and evidence materials" to the EC during hearings.

"The [European] disclosure was based on the 'facts' unilaterally identified by the EC, rather than the facts recognized by both sides," the ministry said. "China firmly opposes this and it is highly concerned."

The adjustment of the provisional measures took into consideration the responses from interested parties, the EC said. Import tariffs on Tesla cars produced in China were cut to 9% from the 20.8% anticipated earlier, after the U.S. automaker requested an individual examination to determine the duty level based on the specific subsidies it received.

The EC said it verified the level of subsidies granted to Tesla during a visit to China and conducted the same checks on the other sampled Chinese exporting producers.

"Any differences in duty levels reflect the varying levels of subsidization among the different schemes, which were affected by various elements, such as the level of cooperation and the different organizational structures in areas like financing," the EC said.

The tariff for leading Chinese automaker BYD was lowered to 17% from 17.4%; SAIC Motor's figure was cut to 36.3% from 37.6%; and Geely's to 19.3% from 19.9%, according to the EC disclosure. Other cooperating companies are subject to a tariff of 21.3%, while noncooperating companies will be taxed 36.3% on top of an existing 10% import duty.

Meanwhile, European automakers with local joint ventures, which did not yet export at the time of the investigation period, will benefit from the duty applied to the cooperating group in which they are integrated, according to the commission.

Interested parties can appeal against the draft decision by Aug. 30, before definitive findings of the EC investigation are approved by member states through a vote and published in a final disclosure by Oct. 30. Once implemented, the definitive measures would be in force for five years and would be extendable upon review, the EC said.

Even before the final implementation, Chinese carmakers appear to have taken a hit from the additional tariffs. In July, when the new tariffs took effect on a provisional basis, 45% fewer China-made EVs were registered in the EU than in the previous month, according to German market research firm Dataforce, which compiled data from 16 countries.

In a response on the day after Tuesday's disclosure, the China Association of Automobile Manufacturers said the tariff hikes will harm both Chinese and European parties.

"[The hikes] have brought great risks and uncertainties to Chinese companies operating and investing in Europe and damaged their confidence," the association said. "[They] will have a serious adverse impact on promoting the development of the EU's automotive industry, increasing local employment opportunities, and achieving green and sustainable development."