China's economy is sluggish, and traditional manufacturing industries continue to shrink. Low-tech production sectors such as garment manufacturing and electronics no longer require intensive labour. (Getty Images)
[People News] On March 20, Belgian-Dutch-language media first reported a letter from Belgian Prime Minister Alexander De Croo to European Commission President Ursula von der Leyen. In this letter, De Croo urged a change in strategy and stronger countermeasures against the CCP's "unfair" competition, stating that the CCP "is destroying our economy".
De Croo highlighted that the approach of viewing China (the CCP) as both a systemic competitor and a cooperative partner is outdated. The CCP continues to pursue low-price export strategies in strategic sectors such as chemicals, pharmaceuticals, and ecological transformation, which not only "threatens the industrial foundation of Europe" but also requires technology transfer from companies investing in the CCP, and even "steals" their intellectual property.
He expressed particular concern regarding the CCP's "cyberattacks and espionage activities," calling on member states and other countries facing similar "structural problems," including the United States, Canada, Japan, and India, to take coordinated actions, enhance cooperation, and improve their positions in the global supply chain to counterbalance the CCP.
De Croo emphasised that we should not fear retaliation from the CCP: "We have reached an irreversible critical point and must make difficult decisions as soon as possible to protect our industry, economy, and the welfare of our citizens in the long term."
The CCP's unfair trade practices with Europe are evident in various products, including mechanical components, handicrafts, and ceramics. However, it is important to note the significant growth in imports of automotive parts and vehicles in recent years.
The CCP's Destructive Economic and Trade Actions Against Europe and the United States
According to an analysis report by Ernst & Young (EY), the European Union's exports of cars and parts to the People's Republic of China (PRC) dropped by 34% last year, falling to 16 billion euros. Since 2022, this figure has decreased by more than half. Meanwhile, imports of related products from the PRC increased by 8%, reaching 22 billion euros. In just a few years, what was once a trade surplus of hundreds of billions of euros has now turned into a deficit.
Furthermore, the PRC's monopolistic trade in certain scarce products in the European and American markets has raised concerns among many experts in various countries, particularly regarding pharmaceuticals.
On March 18, the U.S. House of Representatives' Select Committee on China held a hearing to address the U.S. reliance on active pharmaceutical ingredients and advanced drugs from the PRC. During the hearing, lawmakers and experts highlighted that the PRC is monopolising the U.S. pharmaceutical market, a situation they believe is the result of deliberate design. Several lawmakers and experts emphasised the significance of this issue, linking it to strategic competition with the PRC and U.S. national security.
John Moolenaar, chairman of the Select Committee on China, opened the session with a serious warning: about 90% of the key raw materials for medications that Americans use daily are under the firm control of China (PRC). He remarked, 'This situation is not simply a product of market forces; it is a result of deliberate actions by China (PRC). For decades, through state subsidies, relaxed environmental regulations, and various other factors, China (PRC) has effectively pushed Western competitors out of the market.'
During a recent session, Republican Congressman Neal Dunn from Florida, a member of the special committee, stated, 'We have handed over the surgical instrument tray to the Chinese Communist Party.' Experts are advocating for enhanced collaboration with allies, particularly within the Group of Seven (G7), to collectively tackle the challenges posed by the Chinese Communist Party.
Just a few days prior, the U.S. Senate Special Committee on Ageing conducted a hearing titled 'Foreign Dependence: How China (the Chinese Communist Party) Controls the U.S. Drug Supply.' Numerous senators and witnesses cautioned that this reliance has emerged as a significant national security and public health concern.
Awakening in Europe and America
In response to the aggressive and domineering actions of the Chinese Communist Party, many experts in Europe and America are urging a comprehensive approach to strengthen the examination of Chinese companies' market entry and their listings in the United States.
On March 19, Tim Scott, the Republican Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, and Elizabeth Warren, the committee's chief Democratic member, sent a joint letter to Paul Atkins, Chairman of the U.S. Securities and Exchange Commission (SEC). They urged the SEC to enhance its examination of the risks associated with Chinese (Communist China) entities listed in the U.S. The senators particularly highlighted their concerns regarding the investment structure known as 'Variable Interest Entities' (VIE), which is frequently employed by Chinese (Communist China) companies to list abroad.
In their letter, the bipartisan group of senators stated: 'The entry of Chinese (Communist China) firms into the U.S. market without adequate safeguards could pose greater risks to American investors and our financial system... (Communist China) applies both direct and indirect pressure on entities owned and controlled by Chinese capital to prioritise Beijing's geopolitical interests over the welfare of American investors and the integrity of our financial system.'
The letter also raised alarms about the 'risks associated with opaque corporate structures,' including VIEs, as noted by the senators.
What is VIE? Let's clarify. VIE stands for variable interest entity, which is an organisational structure for an economic entity (or enterprise). If an investor possesses controlling equity in a certain entity, and this control is not achieved through majority voting, that entity is termed a variable interest entity. Companies operating within the People's Republic of China frequently utilise VIEs to go public overseas. This investment structure separates the overseas listed entity from the domestic operating entity in China. The overseas entity raises foreign capital and manages the financials of the domestic operating entity through its wholly-owned subsidiary in China, but it does not engage in actual business operations.
In essence, Chinese companies can easily exploit loopholes in the U.S. For instance, American investors may unknowingly buy shares in an offshore shell company that has contractual connections to an operating entity in China. This arrangement obscures the true ownership structure of the operating entity, leaving investors with little to no meaningful legal protection.
Bipartisan senators have also raised concerns in a letter about the Chinese Communist Party's theft of sensitive information from American investors. They stressed the importance of vigilance against fraud, manipulation, and misleading disclosures related to foreign issuers.
Senior member Warren remarked in a statement: 'The SEC has a duty to ensure that Chinese companies and other foreign entities do not exploit opaque investment vehicles to access our markets and capture sensitive financial and consumer data for the misuse by the Chinese government.'
Beyond addressing issues like stock market listings, the United States has previously issued warnings and taken precautions against the fraudulent activities of the Chinese Communist Party (CCP) at a national level.
Earlier this year, the U.S. International Trade Commission announced it would investigate the impact on the U.S. economy over a six-year period of revoking China's permanent normal trade relations status. This action could result in increased tariffs on imports from China.
In a statement on its official website, the Trade Commission noted that the investigation's findings are expected to be released by August 21. On his first day in office during his second term, President Trump issued a memorandum titled 'America First Trade Policy,' which directed the U.S. Secretary of Commerce and the U.S. Trade Representative to conduct a thorough assessment of legislative proposals that would grant China (the CCP) permanent normal trade relations status.
Following this, several members of both the House and Senate introduced similar legislation.
If the trade preferences for the CCP are revoked, tariffs on Chinese goods will be increased to higher rates than the 'most favoured nation' treatment, potentially accompanied by additional punitive tariffs.
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