EU Hardens Economic Security Against China
The European Union is implementing stricter economic security measures targeting risks from China. Recent actions include excluding Chinese entities from Horizon Europe research projects in AI, quantum, and semiconductors, and a new Cybersecurity Act targeting high-risk suppliers. The bloc is also promoting "Buy European" procurement policies and considering ownership limits in strategic sectors.
- This policy is framed under the European Economic Security Strategy, first outlined in June 2023, which pursues a "de-risking, not decoupling" approach to China. The strategy is built on three pillars: promoting EU competitiveness, protecting against economic security risks, and partnering with allied countries. - In October 2023, the European Commission identified 10 critical technology areas for risk assessment. Four were deemed most sensitive and in need of immediate collective risk assessment by member states: advanced semiconductors, AI, quantum technologies, and biotechnologies. - A key new tool is the Anti-Coercion Instrument (ACI), which entered into force on December 27, 2023. It allows the EU to impose countermeasures, such as tariffs and trade restrictions, against countries using economic pressure for political ends, a measure partly motivated by China's actions against Lithuania. - The EU is now scrutinizing investments *leaving* the bloc, with the Commission publishing a White Paper in January 2024 to assess risks from outbound investments in sensitive technologies. This led to a January 2025 recommendation for member states to begin monitoring these investments. - The existing framework for screening foreign direct investment (FDI), in effect since October 2020, is being strengthened. A January 2024 proposal would make screening mechanisms mandatory for all member states and expand the scope to include EU-based companies ultimately controlled by non-EU investors. - The heightened regulatory scrutiny has correlated with a sharp decline in Chinese investment in the EU, which fell from a peak of €47.5 billion in 2016 to €6.8 billion in 2023. - In response to increased M&A screening, Chinese investors have shifted strategy towards greenfield investments, which grew from 2% of total Chinese FDI in 2017 to 78% in 2023, with 70% of the 2023 total focused on the electric vehicle industry.
