EC to investigate potential Chinese subsidy of Bulgarian train bid

THE European Commission (EC) has launched its first in-depth investigation into the potentially market distortive role of foreign subsidies in a tender. The case involves the procurement by Bulgaria’s Ministry of Transport of 20 electric push-pull trains together with their maintenance for 15 years and staff training. The estimated value of the contract is Lev 1.2bn ($US 663m).

According to Britain’s Financial Times, the bid by CRRC Qingdao Sifang Locomotive was less than half that of the bid submitted by Talgo, Spain, and 46.7% below Bulgarian State Railways’ estimate. The Bulgarian government referred the bid by CRRC Qingdao Sifang Locomotive to the EC under the Foreign Subsidies Regulation (FSR) which came into effect in July 2023.

The EC alleges that CRRC Qingdao Sifang Locomotive was able to make such a low offer because the company received €1.75bn in state subsidies.

“It shows the commission's determination to preserve the internal market's integrity by ensuring that recipients of foreign subsidies cannot benefit from an unfair advantage to win public contracts in the EU, to the detriment of fair competition,” the EC says.

“Being an open continent presupposes that everyone plays by the rules,” Mr Thierry Breton, European commissioner for the internal market, said on X. “Ensuring that our EU single market is not distorted by foreign subsidies is vital for our competitiveness and economic security.”

Under the FSR, companies must notify their public procurement tenders in the European Union when the estimated value of the contract exceeds €250m, and when the company was granted at least €4m in foreign financial contributions from at least one third country in the three years prior to notification.

CRRC Qingdao Sifang Locomotive submitted its notification on January 22. As a result, the EC believes there are sufficient indications that the CRRC subsidiary has received a foreign subsidy that distorts the internal market.

The EC must make its final decision by July 2. It can then decide whether to accept commitments by the company to remedy the situation, or prohibit the award of the contract, or withdraw its objection.

The EC says that foreign subsidies appear to have distorted the EU's internal market in recent years, but with the FSR it now has the tools to effectively tackle subsidies that distort and undermine the level playing field in the internal market.