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Chinese observers on Sunday said that calls by a US manufacturing advocacy group - Alliance for American Manufacturing (AAM) - for the US to block imports of Chinese vehicles and parts from Mexico are intended to have a chilling effect, which will prevent US consumers from benefiting from affordable and high-quality products and are contrary to its principles of the market economy.  

The call came as Chinese electric vehicle (EV) maker BYD plans to establish a factory in Mexico targeting the US market, Reuters reported. 

If the US does impose such a ban, it would raise concerns of targeting Chinese businesses, which is contrary to the principle of the market economy and the non-intervention principle that the US champions, Gao Lingyun, an expert at the Chinese Academy of Social Sciences who closely follows China-US trade issues, told the Global Times on Sunday

Gao said that such protectionist measures would not address the underlying issues of competitiveness in the US auto industry, which stem from innovation, markets and shortages of talent.

The AAM report argues that the US should not allow vehicles and parts made in Mexico by companies based in China benefit from a North American free trade agreement. Vehicles and parts produced in Mexico can qualify for preferential treatment under the US-Mexico-Canada trade agreement as well as qualifying for a $7,500 EV tax credit.  

Zhou Mi, a senior research fellow at the Chinese Academy of International Trade and Economic Cooperation, highlighted the attractiveness of Mexico for investment and cooperation with China, particularly in the EV sector, thanks to its significant position in the global market, as well as its manufacturing base and openness to foreign investment.

Zhou underscored the potential for the strong development of Mexico's EV industry, represented by existing investment inflows from Chinese companies. 

In response to the AAM report, the Chinese Embassy in Washington defended the nation's automotive exports as a reflection of the Chinese manufacturing industry's high-quality development and strong innovation. The embassy argued that the leapfrog development of China's auto industry has provided cost-effective products with high quality to the world, according to the Reuters report.

In the fourth quarter of 2023, BYD outpaced Tesla to become the world's largest EV seller. Facing challenges posed by China's fast-growing EV industry, the Biden administration issued rules in December to cut subsidies for EVs, batteries and parts that contain sourcing materials from China, aiming to wean the US EV supply chain away from China.

In contrast to the challenges faced in the US, Chinese EVs are making new breakthroughs in the European market. The first batch of BYD ATTO 3 vehicles was delivered to Hungarian customers, witnessed by Hungarian Foreign Minister Peter Szijjarto and BYD Chairman Wang Chuanfu, according to BYD's official WeChat account on Saturday.

With increased market competition brought by Chinese EVs, better products and prices could be developed for European consumers. The entry of Chinese EVs is also expected to have a positive effect on the entire supply chain, bringing new technologies and fostering innovation, aiding Europe's transition to EVs, Zhou told the Global Times on Sunday

If the US government intervenes to block Chinese EVs from entering the market, it would deprive consumers of the benefits brought by technological advances and hinder the Biden administration's efforts to combat climate change, Zhou argued.

BYD has established three stores in Budapest, the capital of Hungary, and plans to continue expanding its sales and service network, expecting to double its stores in the country this year.

China's Foreign Ministry on Thursday slammed the European Commission's so-called economic security plan, which is reportedly aimed at China, saying that the move will only exacerbate global concerns over the EU's rising protectionism and unilateralism and further undermine Chinese and global businesses' confidence in the EU market.

China's main business group in the EU said the EU's plan could have profound implications for a wide range of areas, including investment, trade and technological cooperation. Such a move also shows that the EU is becoming increasingly aggressive and hostile in its "de-risking" strategy aimed at China, and that China needs to prepare a feasible plan to respond, experts noted.

The European Commission released the so-called European Economic Security Package on Wednesday, which calls for tighter scrutiny of foreign investment and more coordinated controls on exports and technological outflows. While the plans did not name any country, the EU had China in mind, Reuters reported, noting that the EU highlights "de-risking," the bloc's strategy of cutting economic reliance on China.

Commenting on the EU plans at a regular press briefing in Beijing, Wang Wenbin, a spokesperson for the Chinese Foreign Ministry, said that in recent years the international community has had many concerns regarding EU's protectionism and unilateralism in the economic and trade fields, noting the new move will exacerbate such concerns.

"Hopefully the EU will abide by the basic norms of the market economy such as free trade, fair competition, and open cooperation, abide by the rules of the WTO, and avoid the introduction of anti-globalization and pan-security policies and measures," Wang said, stressing that such a move would not only affect the EU's international image but also confidence of companies from China and other countries in the EU's business environment.

The EU's plans, which, according to Reuters, could take three years to enter force, have already sparked widespread concerns. China Chamber of Commerce to the EU (CCCEU), which represents more than 1,000 Chinese enterprises in the EU, said that it closely monitors the ongoing development of the EU's economic security strategy and expresses concerns about the impact of the new plans on Chinese companies' investment, trade, and innovation collaboration within Europe.

"Of particular note, the package suggests enforceable rules to tighten FDI screening and introduces measures that might impact the EU's outbound investment, exports, and research collaborations, potentially influencing the confidence of Chinese businesses investing and operating in Europe," the group said in a statement sent to the Global Times.

The group said that its survey of Chinese firms showed that 52 percent were concerned about the negative impact of the EU's FDI screening mechanism, and 47 percent expressed concern about the possible effects of the "European Economic Security Strategy."

EU's woes

Fang Dongkui, secretary-general of the CCCEU, said that the package will still have to go through deliberation within the EU, but it has highlighted the EU's "inward-looking" trend amid sluggish economic recovery and growth in the Eurozone and the EU.

"The aim of these policies is to 'de-risk,' but 'de-risking' will result in increased costs, including business and compliance costs, and these costs will ultimately be passed on to consumers, with the EU public footing the bill," Fang told the Global Times on Thursday.

While the exact impact of the EU economic security package remains to be seen, the move will bring another round of test for China-EU ties, which have already been under increased pressure due to the EU's increasingly aggressive and hostile tone, experts noted.

"Although the EU publicly claims to be focusing on preventing or reducing risks, its policies have become tougher and more aggressive, especially against China," Cui Hongjian, a professor with the Academy of Regional and Global Governance with Beijing Foreign Studies University, told the Global Times on Thursday.

Cui said that China-EU relations were hoped to improve this year, but if the EU artificially set up barriers, it will be more difficult to improve China-EU cooperation in economy, trade and other fields.

China-EU ties have faced pressure after the EU launched the so-called anti-subsidy investigation into Chinese electric vehicles, which has been criticized by Chinese officials as protectionism. Still, Chinese officials have stated that China is ready to provide an open, inclusive, transparent and non-discriminatory environment for EU and other international businesses.

Experts said that while China has been actively promoting win-win cooperation with the EU, Brussels has become increasingly protectionist and aggressive due to its own economic woes, as well as political and geopolitical factors.

"When some EU institutions and politicians are hyping 'security issues,' they also have their own political motives - that is to cater to populist politics within the bloc or to echo the US' rival strategy against China," Cui said, noting that the EU's "de-risking" or so-called "anti-coercion" strategies against China lack factual basis and are entirely based on speculation and imagination.

Going forward, China-EU relations need a rebalancing, in that stability should be maintained in the overall relationship, but China must also come up with practical responses to EU's aggression in some areas and specific issues, according to experts.