berlin — Analysts say new draft regulations announced by the European Union this week are likely to hit Chinese exports when approved and further strain relations between Beijing and Brussels.

The regulations, unveiled Wednesday, are intended to protect the bloc’s economy and keep sensitive technology from falling into the hands of geopolitical rivals. A statement accompanying the draft described the regulations as part of an initiative to boost the bloc’s economic security “at a time of growing geopolitical tensions and profound technological shifts.”

The package includes measures to strengthen export controls, identify potentially risky foreign investments in the tech sector, enhance the security of sensitive research and screen foreign investments.

In recent years, Chinese foreign direct investment into Europe has slowed, hitting an eight-year low in 2022, while concern about the security of supply chains, technology and infrastructure has risen, said Clara Brandi, professor of economics and political science at the German Institute of Development and Sustainability in Bonn.

“The initiative puts a strain on relations with China and Chinese firms, although China is explicitly mentioned very little in the relevant EU texts,” Brandi told VOA.

An EU Commission spokesperson told VOA the new proposal “responds to growing concerns about certain foreign investors seeking to acquire control of EU firms that provide critical technologies, infrastructure or inputs, or hold sensitive information, and whose activities are critical for security of public order at EU level.”

China wants curbs eased

The new measures come despite calls from China for the EU to relax restrictions on high-tech products. Chinese Premier Li Qiang met with European Commission President Ursula von der Leyen at the World Economic Forum in Davos, Switzerland, last week.   

During that meeting, Li called on the EU to “uphold justice, compliance and transparency in economic and trade matters” and to “treat Chinese enterprises fairly.” Li also asked the EU to act “prudently” as it introduces restrictive economic and trade policies.

On the day the economic security package was unveiled, China’s Chamber of Commerce in the EU released a statement noting that more than half of its surveyed companies were concerned about the impact of the new screening mechanism.

More than one-fifth of the 180 Chinese companies surveyed said they planned to expand their presence in Europe over the next one to three years and to increase their investment and merger and acquisition activities.

Ian Choong, an associate professor at the National University of Singapore who specializes in security and Chinese foreign policy issues, said that with the new measures, “exports of certain, but not all, technologies to China” were likely to decrease.

“Of course, the EU limits will reduce technology exchange to some degree. I expect Beijing to reciprocate, which will further limit exchanges. Beijing will seek to impose some penalty on the EU in retaliation,” he predicted.

Asked if the new proposal might discourage foreign investment, the EU Commission spokesperson said the investment screening mechanism was “targeted,” and that there was “no evidence” that such screening procedures would slow down investments.

Security concerns

Still, the EU has become increasingly wary of security breaches initiated by countries like Russia and China, even as it tries to boost its own market competitiveness.

“The EU is trying to get rid of its strong dependence on third countries, which it became painfully aware of after Russia’s invasion into Ukraine. The EU’s new China doctrine task is about de-risking,” said Brandi.

She said the bloc’s concerns were largely justified.

The EU has been wary of China’s growing use of economic power to pursue political goals, including what it called “an economic blockade” in 2022, when Beijing slapped trade restrictions on Lithuania after it moved to withdraw from the Belt and Road Initiative and sought to open an office with representatives from Taiwan.

That and dozens of other examples, including Chinese students studying in the fields of dual-use technology, were cited in a recently adopted European Parliament resolution on the security and defense implications of China’s influence on critical infrastructure.

The bloc believes Chinese students studying in the tech field pose a risk of espionage, while China’s growing capability in AI, cloud computing and other fields is seen as a national security risk.

“There are concerns that China could use EU technologies to engage in the use of force or even aggression in the East and South China seas, or against Taiwan,” Chong said. “Such action could be very disruptive and costly to world trade, including to EU members.”

And as friction among NATO, Russia and China shows no signs of abating, Chong said the initiatives are also a strategic decision.

“Many EU members also are NATO members. They probably do not want to see their technologies being used against their U.S. ally in the event of a contingency in Asia, or for that matter against allies of the U.S. that align with the EU on democratic values,” he said.
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