China Still Struggles with European Trade Policy
BEIJING, China – In early 2015 it was already clear that the Chinse bicycle industry was heading for a difficult year, both in its home market as well as the export business. SRAM’s announcement of a factory closure in Kunshan last June was a strong indication that the slowdown of the bicycle industry was not merely temporary.
The SRAM facility only opened in 2013. It purpose; to supply China’s sports bike market that was, at that time, rapidly growing. That growth slowed down fast in 2015, with an over 30% decline. That depressed situation continued last year. As a result the Kunshan factory was operating at only 20% of its capacity. According to SRAM there was no immediate expectation that the market situation in China will improve in the near future. Also Giant Manufacturing Company Ltd saw its total revenues drop by 6.5% in the first nine months of 2016, mainly as a result of the slowdown in sales in China.
“What started in 2015, continues in 2016 and is expected to continue for next year; the Chinese market continues to be down,” said Giant Global Group CEO Tony Lo last year December.
When asked about the current market conditions of the Chinese industry, China Bicycle Association Chairman Ma (see box on this page) pointed out, “Don’t expect further growth. China’s bicycle production is expected to stabilize at some 80 million units. We also produce about 30 million electric bikes in a year and export merely 5% of that production.”
European trade policy
SRAM’s decision to move production from Kunshan to Taiwan was also because of European anti-dumping and trade preference regulations. They favour Taiwan-produced parts over the ones that are produced in China. The EU levies an anti-dumping duty of 48.5% on China-produced parts that are exported to Europe for OEMs. However, there’s an exemption regulation applied here. Bicycles assembled with Taiwan-made parts in Cambodia and Bangladesh and exported to Europe are making use of the Generalized System of Preferences of the EU, which grants them duty-free import into the European Union. The anti-dumping duties have even become a part of a trade clash between the European Union and China.
Last December Ministers and senior officials from the 18 participants in the Environmental Goods Agreement, representing 46 members of the World Trade Organization (WTO), met in Geneva to work towards liberalising trade on a range of important environmental goods. When discussing trade talks involving more than one trillion dollars (US) the import value of some €25 million for about half a million cheap bicycles imported from China into the European Union became a major problem. According to the European Trade Commissioner Cecilia Malmströom, “Bicycles had become symbolic for China and this proved to be a stumbling block due to European resistance to Chinese bicycle imports.”
Anti-dumping on China made e-bikes
How attentive the Chinese are on anything that might have to result in new anti-dumping regulation was shown by a report published last November shen the China Chamber of Commerce for Import and Export of Machinery and Electronic Products held an ‘Alert Meeting on the EU anti-dumping investigation for e-bikes.’ The China Chamber of Commerce stated that, “We recently learned that an application has been submitted to the European Commission by the European Bicycle Manufacturers Association, requesting to start an investigation on the anti-dumping of e-bikes and speed e-bikes made in China, the HS codes of the investigated products are 87119010 and 87119090.”
The alert meeting was supposed to provide information, learn business opinions, analyse the case and discuss coping strategies. The organization representing the industry, the European Bicycle Manufacturers’ Association (EBMA) denies to have submitted an application to the European Commission requesting to start an investigation.
“There is not any current EBMA request, nor – in EBMA’s knowledge – any new investigation at the European Union Commission at present. The rapidly growing imports from China to the EU are being monitored through Eurostat,” was the EBMA response to Bike Europe’s request for comment. EBMA also points to the fact that in the past rumours on an anti-dumping duty on the import into the EU of e-bikes were going round in China.
China Looking for Partners in Emerging Markets Like India
To consolidate its 80 million-plus annual production the vast Chinese bicycle and e-bike industry is looking for new markets. India is regarded as potentially interesting as the country is switching to premium bicycles as well as e-bikes. For investment cooperation China seeks a preferential trade regime, as became evident at the Asia Bicycle Alliance Conference which took place December 8-9, 2016 in India.
Despite trade barriers like the 48.5% anti-dumping duty for its bicycle and parts export to the EU, China continues to export some 55 million bicycles to markets around the world. But those huge exports are under pressure. In response China is focusing more on its domestic market as well as new markets. Ma Zhongchao, Chairman of the China Bicycle Association (CBA), told Bike Europe at the Asia Bicycle Alliance Conference, “The industry is focusing now more on innovation and making high-end bikes using smart technology. It is also looking for partners in emerging markets like India.”
Ma was heading a formidable delegation comprising of key bicycle producers from China at the Asia Bicycle Alliance conference including the Shanghai based Phoenix Group. “For attracting investments from Chinese companies we urge the Indian government to provide a preferential trade and taxation regime,” said CBA Chairman Ma.
In addition to Phoenix there are other major Chinese producers looking for an entry into the India market. One of them is China’s biggest bicycle and e-bike producer Fushida. This company is said to be producing over ten million bikes annually.