Introduction

China’s funding offers often appear more lucrative than those from the European Union due to several factors:

Financial Advantages

Lower Costs:

Chinese firms, particularly state-owned enterprises (SOEs), can submit exceptionally low bids compared to European competitors. This is possible due to:

Direct and indirect subsidies from the Chinese government

Cheap loan financing from state-owned policy banks

Extensive state-aid provisions

Competitive Pricing:

Chinese companies are considered reliable and more likely to meet deadlines than European competitors, often at a lower cost.

Market Access and Economic Incentives

Rapid Market Penetration:

China uses subsidies extensively to take a leading role in global markets, especially in green-tech products like battery electric vehicles and wind turbines.

Scale and Dominance: Extensive government support allows Chinese companies to:

Scale up rapidly

Dominate the Chinese market

Expand into foreign markets

Government Support and Subsidies

Substantial Financial Backing: Large industrial firms in China receive government support equivalent to about 4.5% of their revenues, significantly higher than in OECD countries.

Diverse Support Mechanisms:

Chinese government support includes:

Below-market credit (0.52% of GDP)

Direct subsidies (0.38% of GDP)

Tax incentives (0.38% of GDP)

R&D support and tax incentives (0.07% of GDP each)

Strategic Advantages

Gateway to Europe: Projects like the Pelješac Bridge in Croatia are seen as China’s entry point into the European market, leading to subsequent infrastructure project wins.

Soft Power Implications: Chinese companies often become the perceived face of EU-funded projects, potentially overshadowing the EU’s financial contributions.

Challenges for European Competition

Market Imbalances:

The EU-China economic relationship is critically unbalanced, with significant asymmetry in market openings.

Systemic Distortions:

China’s economic model and industrial policies create overcapacity and negative externalities for WTO members.

Regulatory Obstacles:

European businesses face discrimination, lack of a level playing field, and a complex legal framework in China, making it difficult to compete.

Conclusion

While China’s funding offers may seem more attractive in the short term, it’s important to note that the EU is working to address these imbalances and ensure fair competition in the long run.