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EU launches probe into China's public procurement of medical devices

Brussels accuses Beijing of preventing market access to European producers of medical devices.
Brussels accuses Beijing of preventing market access to European producers of medical devices. Copyright Tamas Vasvari/MTI - Media Service Support and Asset Management Fund
Copyright Tamas Vasvari/MTI - Media Service Support and Asset Management Fund
By Jorge LiboreiroGerardo Fortuna
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The European Commission has launched a probe to examine how China favours its domestic companies in tenders for medical devices and weigh possible tit-for-tat measures.

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Brussels has long accused Beijing of employing distorting and discriminatory practices that make it all but impossible for European companies to win public contracts in China in the valuable sector of medical devices, where the bloc still retains a competitive edge.

These practices include stringent certification processes, opaque approval systems, clauses to safeguard "national interests" and demands for abnormally low prices that foreign manufacturers are simply unable to meet. Due to a "Buy China" policy, the EU's medical device industry has repeatedly decried that Chinese public tenders previously open to imports now specifically request China-made products.

Germany, the Netherlands, Ireland, France, Belgium and Italy are among the world's leading exporters of medical appliances, some of them with high technological added value such as X-ray machines or pacemakers, some of more commonly used like contact lenses and sticking plasters.

The probe, announced on Wednesday, will build on the feedback provided by member states and businesses and dialogue with Chinese representatives, and will last up to nine months, with a possible extension of five.

It was initiated at the Commission's behest, rather than as a result of a complaint.

If the investigation confirms the existence of the suspected practices, the Commission will be entitled to slap retaliatory measures on China to level competition on both sides. This could see Chinese companies completely cut off from public procurement across the EU, an open market worth over €2 trillion.

Alternatively, the Commission may limit the prohibition to tenders that exceed a certain value or impose conditions that lower the score of Chinese applicants.

The inquiry could end at any moment if Beijing agrees to remedy the situation and guarantee reciprocity for European suppliers, although this has not been the case in other economic sectors where Brussels has raised objections.

Medtech Europe, the trade association that represents Europe's medical technology industries pointed out that the "Buy China" policy makes market access "challenging."

"We hope that this investigation will lead to a meaningful dialogue with China and that the concerns highlighted in the investigation can be addressed through dialogue, eliminating the necessity of implementing (additional) measures in the EU procurement market," a spokesperson of Medtech Europe said in a statement.

According to the trade association, China is one of the major trading partners for medical equipment in Europe, making up 11% of the market's export destinations in 2022.

Tough on China

The latest move is the first of its kind under the International Procurement Instrument (IPI), one of the legislative tools that the bloc has introduced in recent years to combat the unfair competition it faces from countries around the world – most particularly China.

With its heavily centralised economy, the Chinese Communist Party employs a vast range of tools, such as subsidies, cheap loans, tax breaks, preferential treatment and regulatory requirements, to favour domestic companies to the detriment of foreign firms.

This has caused huge friction with Western allies, who have teamed up to defend themselves against Beijing's heavy-handed tactics, "de-risk" from vulnerable dependencies and prevent a flood of cheap Chinese exports.

The probe on medical devices comes almost at the same time as the Commission carried out unannounced inspections at the offices of a Chinese company in Poland and the Netherlands, the first to be done under the Foreign Subsidies Regulation.

Both follow two separate EU investigations into Chinese producers of wind turbines and solar panels, which are suspected of benefitting from generous state subsidies to win contracts in the bloc.

Meanwhile, Brussels is in the final stages of an inquiry into China-made electric vehicles, equally believed to be artificially low-cost thanks to massive government support. This probe has been described as the most consequential of this mandate and could lead to an increase in tariffs to offset the advantage caused by the state subsidies.

"China is for us simultaneously a partner, an economic competitor, and a systemic rival. And the last two dimensions are increasingly converging," Margrethe Vestager, the European Commission's executive vice-president, said earlier this month.

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Although most European capitals have welcomed these initiatives as necessary to protect the integrity of the single market and prevent the obliteration of domestic companies, Beijing has struck a defiant note, attacking Brussels for "protectionism."

"We urge the EU to adhere to its commitment to the open market and the principle of fair competition, abide by WTO rules, and stop unwarrantedly suppressing and restricting Chinese companies on various pretexts," Wang Wenbin, the spokesperson of China's Foreign Ministry, said on Wednesday.

"We urge relevant parties to stop making groundless accusations and slandering China."

This article has been updated with more information.

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