Investigation Launched against Budapest-Belgrade Railway Line Contractor

The European Commission has launched a full investigation into potentially market-distorting foreign subsidies to China’s CRRC Qingdao Sifang Locomotive, a subsidiary of state-owned CRRC Corporation, Portfolio reports. The parent company is also interested in the construction of the Budapest-Belgrade railway line.

On Friday, the European Commission (EC) announced that it is opening its first case under the Foreign Subsidies Regulation (FSR) against a subsidiary of the Chinese state-owned CRRC Corporation. A preliminary investigation has already been carried out in Brussels and found that state subsidies granted to the parent company from the Chinese central budget gave the company a competitive advantage, according to a statement from the executive body.

Under the FSR regulation, companies are obliged to notify their public procurement tenders in the EU when the estimated value of the contract exceeds EUR 250 million, and when the company has received foreign aid of at least EUR 4 million in the three years preceding the notification.

The case concerns a public procurement tender by CRRC Qingdao Sifang Locomotive for 20 electric “push-pull” trains and a 15-year maintenance contract worth EUR 610 million for the Bulgarian Ministry of Transport.

The aim of the investigation is to establish whether the financial support to the Chinese company conferred an unfair advantage and thereby possibly distorted the market. Depending on the results, the Commission has the power to either authorize the deal with corrective measures or block it altogether.

This case is in line with the EU’s growing recognition of the need for increased economic monitoring amid growing geopolitical concerns, points out the portal. Last month, the EC proposed a comprehensive plan to strengthen economic security, including measures such as tighter controls on foreign direct investment and increased export controls.

Although EU officials have been cautious in the past about tightening economic monitoring, the changing geopolitical situation has prompted a reassessment of the need for increased surveillance.

EU Commissioner for Competition Margrethe Vestager stressed the need for Europe to compete in the global race for vital technologies and said the continent cannot be a playground for major players alone and must play an active role in shaping its economic future.

In Hungary, the Chinese state-owned company CRRC is involved in the Budapest-Belgrade railway project. The parent company also had a Hungarian subsidiary, CRRC Industry Investment Co., Ltd. Direct Trade Representation, that has been since removed from the company register. Another subsidiary of the company, CRRC Changchun, will manufacture trainsets designed to meet the railway requirements between Hungary and Serbia. So far, no proceedings under the FSR have been opened against this company, but if the EC’s findings in the case are unfavorable, it could focus attention on the other companies in the CRRC group.

Via Portfolio, Featured image: Pixabay