EU Chief Makes Case For Stronger China Investment, Trade Controls

The European Commission will present ideas this year on a potential outbound investment screening regime, which could look to prevent European investments in sensitive Chinese technology sectors, Commission President Ursula von der Leyen said last week. She also said the EU will consider new trade restrictions on dual-use goods, including those that may be used for human rights abuses.

An EU outbound investment screening tool would be a “targeted instrument” covering a “small number of sensitive technologies where investment can lead to the development of military capabilities that pose risks to national security,” von der Leyen said during a speech in Brussels on EU-China relations. She said the commission will “present some initial ideas” on the tool as part of its new economic security strategy, set to be released later this year. The strategy will “map out where we need to strengthen our economic security and how to better use our trade and tech security tools.”

Von der Leyen’s speech, which delivered some of the commission’s strongest comments to date in support of new China trade and investment restrictions, came as the U.S. implements new, sweeping export controls on chip equipment destined to China (see 2302080048) and considers a new outbound investment review regime (see 2303060007). Von der Leyen said China’s “changing policies” may require the EU to develop its own “new defensive tools for some critical sectors,” specifically mentioning microelectronics, quantum computing, robotics, artificial intelligence and biotechnology.

“The European Union needs to define its future relationship with China and other countries in sensitive high-tech areas,” she said, especially where “dual-use purposes cannot be excluded or human rights might be implicated.” The EU should establish a “clear line on whether investments or exports are in our own security interests.”

This includes making sure EU companies’ “capital, expertise and knowledge” are not used to improve the military and intelligence capabilities of “those who are also systemic rivals.” She said the EU has to “look at where there are gaps in our toolbox which allow the leakage of emerging and sensitive technologies through investments in other countries.”

Von der Leyen specifically pointed to China’s civil-military fusion efforts as a primary EU concern, saying the bloc needs to pursue “economic de-risking” from the country. “The starting point for this is having a clear-eyed picture on what the risks are. That means recognizing how China's economic and security ambitions have shifted,” she said. “But it also means taking a critical look at our own resilience and dependencies, in particular within our industrial and defense base.”

But she also stressed that the EU isn’t seeking to sever economic ties with China. “I believe it is neither viable -- nor in Europe's interest -- to decouple from China,” von der Leyen said. “But our relationship is unbalanced and increasingly affected by distortions created by China's state capitalist system. So we need to rebalance this relationship on the basis of transparency, predictability and reciprocity. We have to ensure that our trade and investment relations promote prosperity in China and in the European Union.”