Chinese Auto Industry Sets Up Factories in Morocco, EU Fears It Could Become a Springboard for Subsidized Goods into Europe
(Reuters, Rabat, 31st) Chinese auto parts manufacturers are planning major investments and setting up factories in Morocco, and the EU is increasingly vigilant about this, fearing that this North African country will become a springboard for Beijing to export its highly subsidized goods, potentially causing a serious impact on European industry.
The Financial Times reported that EU Trade Commissioner Maros Sefcovic said that Chinese companies plan to invest billions of dollars in Morocco, reflecting Beijing's attempt to "transship" exports through third countries to sell off its domestic industrial overcapacity to Europe.
Sefcovic told the Financial Times: "This is becoming a major problem for the European economy."
As trade tensions escalate, the EU has begun to strengthen measures against China and so-called trade proxies. The European Commission last year ruled that aluminum wheels exported from Morocco enjoyed "unfair subsidies" from the Moroccan and Chinese governments.
EU officials admit that it is sometimes difficult to distinguish between genuine Sino-Moroccan industrial cooperation and attempts to circumvent EU tariffs.
The EU currently imposes tariffs of up to 45% on Chinese electric vehicles. The OECD estimates that China's subsidies to industries are about 3 to 8 times those of OECD member countries, and often take the form of concessional loans, making them difficult to detect and counter.
At an investor meeting held last week in Casablanca, Morocco's largest city, Chinese companies argued that Morocco is an important node in the European automotive supply chain.
The Financial Times said that Renault Group and Stellantis Group, which owns the Peugeot brand, also have large factories in Morocco, making it more complicated for the EU to take any trade defense measures.
Chinese brake system manufacturer Zhejiang Asia-Pacific Mechanical & Electrical (APG) will open a new $70 million factory in the Moroccan port city of Tangier this year; its executives said it will combine local labor and raw materials with components and technology from China.
The report mentioned that there are nearly 12 Chinese companies in the Tangier Science and Technology Park. Qingdao Sentury Tire's factory is already operational, and the world's largest battery anode material supplier BTR New Material Group is also building a new plant there.
Other Chinese investments in Morocco include battery maker Gotion High-tech's $1.3 billion mega-factory in Kenitra.
Morocco's advantages in attracting foreign investment include a five-year corporate tax exemption, an abundant and young workforce, green energy supply to help reduce EU carbon tax burdens for companies, and free trade agreements with about 50 countries including the EU and the US, giving companies access to a market of 2.5 billion consumers.
According to Fitch Solutions, these tariff-free trade agreements are the biggest attraction for Chinese companies, and "near-shore production" is seen as a way to reduce tariff risk.
Moroccan officials deny that the country's special economic zones will become a "back door" for Chinese overcapacity into the EU, thereby exacerbating the hollowing out of industries in manufacturing powerhouses like Germany.
However, Morocco cannot easily ignore the EU's concerns. The EU is Morocco's largest trading partner. Last year, Morocco's exports to the EU exceeded 26 billion euros, accounting for one-third of total exports, of which more than half were products from machinery and transportation. (Editor: Hong Peiying) 1150531
