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EUROFER: China takeover of Serbian steel mill “undermines fair competition”

21 June 2016
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Photo: © Železara Smederevo

According to EUROFER,The purchase of a steel works un an EU candidate country by Chinese Hebei Iron and Steel enterprise raises serious concerns about unfair competition.

The visit beginning today of China’s President to Serbia follows the agreement over the sale of Serbia’s largest steel producer, Zelezara Smederevo, to Hebei Iron & Steel. The purchase of a steel works in an EU candidate country by a state-owned Chinese enterprise raises serious concerns about unfair competition from state-backed enterprises and shines a spotlight on China’ continued lack of progress towards meeting its WTO commitments.

“China’s government is pushing Chinese companies to carry out takeovers abroad, a practice that was criticised in the May 2016 G7 Leader’s Declaration[1]. Foreign investment is genuinely welcome in the EU and EU neighbourhood, but only under fair, undistorted market conditions,” said Axel Eggert, Director General of the European Steel Association (EUROFER).

“However, in this instance, a steel firm is being invested in by an undertaking – Hebei Iron & Steel – which is directly owned and run by the Chinese government. Zelezara Smederevo was already subject to an ongoing National Restructuring Programme as part of Serbia’s EU accession procedure. The subsequent purchase by a Chinese state owned enterprise undermines both efforts to combat global steel overcapacity and the free and fair conduct of the market – as sought by the G7” emphasised Mr Eggert.

“Market conditions do not prevail in China, and by promoting blank-cheque investments abroad, China shields its national champion companies from the commercial pressures that would prevent a private investor from making a similar purchase. This is a new way of exporting the distortions in China’s market and only confirms that China cannot yet be granted Market Economy Status (MES) at the WTO”, added Mr Eggert.

Additionally, China does not meet four out of the five EU criteria to be considered a market economy. These shortcomings continue even as the country sustains up to 400 million tonnes of overcapacity in steel production.

“The EU must resist calls for MES to be granted until the Chinese government ceases to intervene so intensively in its economy, puts to bed the distortions in its market, and opens up to free and fair competition and international trade. This latest purchase merely reconfirms the problems raised by China’s non-market conditions; worsened by the attempt to project these distortions abroad using state-backed means”, concluded Mr Eggert.

Earlier this year,  Serbia announced an international tender for the sale of Železara Smederevo  owned by the state, which should have been sold to a private investor according to conditions prescribed by the EU. Only one bid was received and that of Hebei Iron and Steel Group, which has  bought the company. The whole case about buying steelworks  is especially monitored by the EU which set condition that only  products which are produced in the Serbian steel plant  should be placed on the market. Chinese investors promised to modernize obsolete steel mill and to turn it into one of the most competitive steel producers in Europe.


source: EUROFER

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