Chinese train maker in EU crosshairs over its foreign subsidy

BRUSSELS, Feb 16 (Reuters) - EU antitrust regulators on Friday used new tough rules to open an investigation into Chinese train maker CRRC Qingdao Sifang Locomotive on whether its foreign subsidies gave it an unfair advantage in a Bulgarian procurement tender for electric trains.

The CRRC Corporation-owned subsidiary notified the European Commission last month of its plan to take part in the tender in line with the Foreign Subsidies Regulation, new rules that took effect last July and which are aimed at distortive foreign subsidies.

The EU executive said a preliminary review made it clear that a full-scale investigation was needed, the first probe of its kind.

"There are sufficient indications that this company has been granted a foreign subsidy that distorts the internal market," the European Commission said in a statement.

It said the investigation will look into whether the parent company's foreign financial contribution to CRRC Qingdao Sifang Locomotive is a subsidy that either gives it a direct or indirect selective benefit and if this allowed it to submit an unduly advantageous tender.

It said the investigation will look into whether the Chinese company's foreign financial contribution is a subsidy that either gives it a direct or indirect selective benefit and if this allowed it to submit an unduly advantageous tender.

"Such an offer could cause other companies participating in the public procurement procedure to potentially lose sales opportunities," the Commission said.

The EU executive will decide by July 2 whether the foreign subsidy gives the CRRC Corporation-owned subsidiary an unfair advantage.

It can then either accept remedies offered by the company or clear or block the award of the contract. CRRC is a Chinese state-owned rolling stock maker.

The Bulgarian Ministry of Transport and Communication public procurement tender, with an estimated value of 610 million euros, is for 20 electric "push-pull" trains and for their maintenance over 15 years. (Reporting by Foo Yun Chee; Editing by Hugh Lawson)