The European Union is fundamentally rethinking its economic engagement with China, proposing strict new conditions for Chinese investments in Europe, including mandatory technology transfers, and fortifying export controls on critical dual-use technologies. This strategic shift is a cornerstone of the EU’s ‘de-risking’ policy, designed to safeguard its economic security and technological sovereignty amidst increasing global competition.
The European Union finds itself at a critical juncture in its relationship with China. Historically, the bloc has viewed China through a multifaceted lens: a partner for cooperation, an economic competitor, and a systemic rival. However, this complex relationship has become increasingly strained due to a rising tide of irritants, including China’s domestic repression, assertive foreign policy, economic coercion, boycotts of European goods, and export controls on critical raw materials. In response, the EU is initiating a significant policy pivot, aiming to protect its economic security and technological sovereignty through new conditions on investments and reinforced export controls.
The ‘De-Risking’ Imperative: Setting New Investment Conditions
A central pillar of the EU’s evolving strategy is its “de-risking” policy—a measured approach aimed at reducing economic dependencies and vulnerabilities without resorting to full “decoupling.” This strategy is now translating into tangible proposals, most notably concerning foreign investments. The EU is actively exploring the implementation of specific pre-conditions for Chinese companies seeking to invest in Europe. These conditions are expected to include mandatory transfers of technology and know-how.
This move is a direct response to a long-standing concern within the EU: that European businesses investing in China have often been required to transfer technology as a condition for market access or through mandated joint ventures. As Danish Foreign Minister Lars Rasmussen articulated during a recent meeting, the EU should draw inspiration from the US and China in setting such conditions. He stressed that any Chinese investments in Europe must come with the prerequisite of reciprocal technology transfer. European Trade Commissioner Maros Sefcovic further underscored this point, stating that the EU welcomes “real investments” that genuinely create jobs and involve the transfer of technology and intellectual property rights, mirroring the experiences of European companies investing in China.
This strategic stance, while aimed at fostering a more equitable investment environment, has not gone without criticism. Chinese foreign ministry spokesperson Lin Jian, for instance, has voiced opposition to forced technology transfers and “protectionist and discriminatory practices” masquerading as competitiveness measures, as reported by Reuters. However, the EU maintains that its measures are essential for ensuring a level playing field and protecting its strategic interests.
The concept of “de-risking” itself is a nuanced one for the European Union. Unlike a complete “decoupling” from the Chinese economy, which would involve severing economic ties, de-risking focuses on reducing vulnerabilities in critical supply chains and preventing technological dependencies. This approach has been extensively discussed by policy think tanks, with analyses from organizations like the European Council on Foreign Relations highlighting its aim to build economic resilience without abandoning engagement.
Safeguarding Critical Technologies: A New Era of Control
Beyond investment conditions, the European Commission is also planning to significantly reinforce its export controls on goods with both civilian and military applications, commonly known as “dual-use” goods. This initiative is a core component of the “European economic security strategy,” a comprehensive document outlining the EU’s approach to making its economy more resilient and identifying emerging risks. The primary concern is preventing the leakage of critical know-how to foreign rivals, particularly in a “narrow set of key enabling technologies with military implication.”
The technologies identified as critical for economic security and susceptible to such risks include:
- Quantum computing
- Artificial intelligence (AI)
- 6G communication technologies
- Biotechnology
- Robotics
The EU already controls exports of specified dual-use goods, but the Commission plans to work with member states to produce a more detailed list of technologies deemed critical to economic security. This push for stronger controls highlights a growing consensus within the EU about the strategic importance of protecting its technological edge. A significant precedent for such controls is the Dutch plan that effectively bars Chinese companies from acquiring the most advanced semiconductor-making tools from ASML. This action, while a national competence, exemplifies the type of targeted restrictions the EU aims to coordinate on a broader scale, as detailed by publications such as The Wall Street Journal.
While export licenses and security interests traditionally fall under national competences, the Commission seeks greater cooperation among member states to align these efforts. Furthermore, the EU executive is also scrutinizing inbound investments and may propose revisions to its screening mechanism before the end of 2023. These measures collectively aim to safeguard vital supply chains, including energy, critical infrastructure like telecom networks, and protect against economic coercion, ensuring that leading-edge technology developed within the bloc remains secure.
Implications for Europe’s Tech Future
For the tech community, researchers, and developers within Europe, these policy shifts signal a new operating environment. The heightened focus on protecting intellectual property and preventing unwanted technology transfers could foster a more secure ecosystem for innovation within the EU. However, it also introduces complexities, potentially impacting international collaborations and market access, particularly for companies heavily reliant on the Chinese market.
The EU’s pivot is not merely about defensive measures; it’s also about strengthening its own strategic autonomy. By ensuring that investments bring tangible benefits in terms of job creation and technological advancement, and by preventing critical tech leakage, the EU aims to bolster its long-term economic resilience. This comprehensive approach underscores a clear message: the EU is committed to open trade and investment, but not at the expense of its economic security and technological future.
