Subsidies for new energy vehicles scrapped because of trade talks between China and the United States

US Trade Representative Robert Lighthizer (Robert Lighthizer) attends Sino-US trade talks in Beijing Feb. 14. The Spring Festival is over, how come the 2019 subsidy policy for new energy vehicles has not been introduced? Many people in the industry and consumers are anxiously awaiting the release of the new subsidy policy. Before the official announcement, a piece of foreign media news first entered our field of vision. In the latest round of high-level trade talks between China and the United States, Chinese delegates proposed to the United States to eliminate subsidies for domestic new-energy vehicles, small-engine vehicles and other types of vehicles, the Wall Street Journal quoted people familiar with the matter as saying on February 14. The news seems to have delayed a new deal on subsidies for a reasonable explanation-whether to eliminate subsidies for new-energy vehicles could be one of the issues in the ongoing Sino-US trade talks. The question is, will subsidies for new-energy vehicles be negotiated away? US: Repeatedly Requesting China to Submit Complete Subsidy Notice China: Subsidies have been submitted and have always been an important issue in Sino-US trade negotiations. 4 February 2019, The Office of the United States Trade Representative (USTR) submitted to the United States Congress the 2018 Report on China's Implementation of WTO Commitments (hereinafter referred to as the USTR Report). He accused the Chinese government of formulating "Made in China 2025" and other related industrial plans covering priority areas such as new energy vehicles, with the aim of "replacing foreign technology with Chinese technology by all means and helping Chinese enterprises to occupy the international market." USTR "Report on China's Implementation of WTO Commitments in 2018" "Chinese Technology" Includes "New Energy Vapor Automotive technology "," all means "includes subsidies. The USTR reports that China's new-energy vehicle policy subsidizes only domestic products, including cars and batteries, rather than imported products. "This has cost American manufacturers of new energy vehicles a lot of orders, and the US government will continue to press the Chinese government to remove this discriminatory treatment," he said. Subsidies only for domestically produced new-energy vehicles are also an example of what the US calls "China's incomplete compliance with WTO obligations". According to the USTR report, since China's accession to the WTO in 2001, the United States has repeatedly asked China to submit subsidy notifications for relevant industries, but the number of notifications submitted by China has fallen far short of the requirements of the United States. The Chinese government disagrees with the US accusations. "China and the World Trade Organization" White Paper Released June 28, 2018 The Information Office of the State Council released a white paper entitled "China and the World Trade Organization", saying that as of January 2018, China had submitted thousands of notifications covering central and local subsidy policies, agriculture, technical regulations, standards, conformity assessment procedures, state-run trade, trade in services, intellectual property laws and regulations and many other areas. Take, for example, the China Subsidies Notice submitted to the WTO Committee on Subsidies and Countervailing Measures in October 2015, which included Chinese subsidies for 86 projects, including port/terminal construction, photovoltaic products and new energy vehicles. China's 2015 subsidy notification to the WTO includes the new energy vehicles component, but in the USTR report, the Chinese side's supplement Post bulletins are still "far from complete". But in the latest round of Sino-US trade talks, there appears to be a turnaround in their differences over subsidies. According to foreign media reports, a source disclosed that the Chinese side offered to abolish subsidies to relevant industries during the negotiations, but the specific manner of abolishing subsidies is not yet known. Combined with the Wall Street Journal's revelations, removing subsidies for new-energy vehicles could become an olive branch for China to sell to the U.S. The time has come to abolish subsidies Putting the elimination of subsidies on new-energy vehicles on the negotiating table would not only give China a bargaining chip, but would also make it more likely that the big issue of how to withdraw subsidies on new-energy vehicles would be resolved. In December 2018, CSIS, a US think tank, released a report entitled "China's Risk Drive into New-Energy Vehicles" ("Risk Chess for the Promotion of New Energy Vehicles in China"). The report estimates that from 2009 to 2017, the Chinese government invested more than Rmb320bn directly in the new-energy vehicle industry, of which Rmb245bn was spent on subsidies for new-energy vehicles. Together with the 70 billion yuan tax deduction for the purchase of new energy vehicles over the same period, the Chinese government has invested more than 390 billion yuan in the new energy vehicle industry, accounting for about 42.4 percent of the total sales of all new energy vehicles in the country over the same period. Therefore, abolishing the subsidies for new energy vehicles will greatly ease the financial pressure on China. At that same time, subsidy The problem of fraudulent subsidy derived from the system will no longer exist; The debate over the technology route for new-energy vehicles is also expected to shift from "which technology gets more subsidies" to "which technology is more popular in the market". More importantly, 2019 is likely to be the last year of subsidies, and both the industry and the market should be prepared if subsidies for new-energy vehicles recede at this point, roughly the same time as originally planned. Against the backdrop of the Sino-US trade talks, this seems to be the right time to remove subsidies. So, the question arises. If the "Chinese proposal" is adopted by the US, does it mean that subsidies for new energy vehicles will return to zero with immediate effect? Negotiations need to move forward, and industry needs to stabilize. Proposals to eliminate subsidies are certain, but how they will be eliminated is uncertain. According to the "source" mentioned in the above-mentioned Chinese and foreign media, although in the Sino-US trade negotiations, the Chinese representative voluntarily proposed the abolition of subsidies, this did not fully convince the US representative, partly because the Chinese side has not disclosed the specific plan for the abolition of subsidies. Why not divulge more details? It is a diplomatic strategy, perhaps more ambivalent than ever, to eliminate subsidies for new-energy vehicles. For China, removing subsidies for new-energy vehicles could both boost trade talks and ease fiscal pressures, killing two birds with one stone. On the flip side of the coin, many companies that benefited from government subsidies in the early days are likely to come under more pressure, and the weakness of the domestic car market is feared to be further exacerbated. At the Club of 100 forum in January 2019, Miao Wei, minister of industry and information technology, said the general principle of subsidy retreat was to ensure that subsidies were fully subsidized by 2021 After the ministry withdraws, the industry does not produce the big fluctuation, releases the recession pressure in stages, prevents one time recession gradient to be too big, brings the big rise and then the big fall. On the one hand, trade negotiations between China and the United States need to move forward and commitments made need to be implemented; on the other hand, possible fluctuations in domestic enterprises and markets need to be taken into account. How can these two sides compromise in the next round of Sino-US trade talks? Among the industry subsidies affected may be new-energy vehicle subsidies. At the invitation of the US side, President Xi Jinping's special envoy, Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council and Chinese leader of the China-US Comprehensive Economic Dialogue, will visit Washington and hold the seventh round of high-level consultations on Sino-US trade and economic cooperation with US Trade Representative Leiter Sheezer and Finance Minister Mnuchin on February 21 and 22, Xinhua reported on February 19. If subsidies for new-energy vehicles are to weigh in on the Sino-US trade talks, the industry will have to wait.