BEIJING: China said Thursday that its investigation into EU practices found that Brussels imposed unfair “trade and investment barriers” on Beijing, adding to long-running commercial tensions.

Beijing announced the probe in July, after the bloc launched investigations into whether Chinese government subsidies were undermining European competition. Beijing has consistently denied that its industrial policies are unfair and has threatened to take action against the EU to protect Chinese companies’ legal rights and interests.

Its commerce ministry said Thursday that the EU’s implementation of its Foreign Subsidies Regulation (FSR) had discriminated against Chinese firms and “constitutes trade and investment barriers”. The ministry said that “selective enforcement” of FSR measures resulted in “Chinese products being treated more unfavorably during the process of export to the EU than products from third countries”.

It added that the FSR had “vague” criteria for investigating foreign subsidies, placed a “severe burden” on the targeted companies and had opaque procedures that created “huge uncertainty”. EU measures like surprise inspections “clearly exceeded the necessary limits”, while investigators were “subjective and arbitrary” on issues like market distortion, according to the ministry.

Companies deemed not to have complied with investigations also faced “severe penalties”, which placed “huge pressure” on Chinese firms, it said. The ministry said FSR investigations had forced Chinese companies to abandon or curtail projects, causing losses of over 15 billion yuan ($2.05 billion).

Meanwhile, China narrowly avoided slipping into deflation in December with prices rising at their slowest pace in nine months, official figures showed Thursday, as Beijing struggles to kickstart consumer activity in the world’s number two economy. The tepid reading comes after the government unveiled a range of measures at the end of last year aimed at boosting consumption as well as providing support for the troubled property sector, including interest rate cuts.

However, data showed that has not yet filtered through, with the consumer price index (CPI), a key measure of inflation, easing to 0.1 percent last month, from 0.2 percent in November, according to the National Bureau of Statistics (NBS). The reading is the lowest since March.

A survey of economists had forecast 0.1 percent.

For the whole of 2024 prices were up 0.2 percent, the same as the previous year. Sluggish spending—combined with persistent woes in the property sector and local government financing strains—has cast doubt on the feasibility of official growth targets.

China emerged from a four-month period of deflation in February, a month after suffering the sharpest fall in prices for 14 years.

While deflation suggests the cost of goods is falling, it poses a threat to the broader economy as consumers tend to postpone purchases under such conditions, hoping for further reductions.

A lack of demand can then force companies to cut production, freeze hiring or lay off workers, while potentially also having to discount existing stocks—dampening profitability even as costs remain the same. “Recent economic data stabilized but the momentum is not strong enough to generate upward pressure on consumer prices yet,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, said in a note. “The deflationary pressure is persistent,” he said.

Low inflation may lead to an increase of real interest rates, said Yue Su, Principal Economist at The Economist Intelligence Unit. “So monetary easing policy needs to be more proactive to really reduce the borrowing cost of enterprises, which is important for a broad recovery of the economy,” she told AFP.

President Xi Jinping said last week that the country’s economy is expected to have grown about five percent last year, in line with Beijing’s official target. Other projections suggest China’s economy came slightly short of that goal, with the International Monetary Fund predicting growth of 4.8 percent last year. The IMF has forecast overall economic growth in China will slow to 4.5 percent this year. China is expected to release its growth data for 2024 next week. — AFP