Threatened by security challenges to its critical infrastructure and digital technology by China, the European Union this week discussed a proposal on de-risking strategy in
Brussels. Even as not all 27 European countries were on board with their de- risking/ decoupling strategy, they called for lessening their dependence on China.
Indication of lack of unanimity among EU members on de-risking strategy was out before the world as a day before the June 29 meeting in Brussels, Hungarian Foreign Minister Peter Szijjarto lashed out against the European leaders for their de-risking approach. The South China Morning Post quoted the Hungarian Foreign Minister as saying that cutting off “the world’s second-largest economy would be “a brutal suicide” for Europe.
Framed by the 27 European countries’ bloc, the de-risking strategy proposal published on June 20 aims at fending off risks in industries that have military applications such as
quantum computing, advanced semiconductors, and artificial intelligence. It also envisages increasing scrutiny of foreign direct investments.
According to Nikkei Asia, even if the EU’s strategy does not mention China by name, but “its language reflects criticism frequently levelled at Beijing by Europe, the US, and
others.” In this backdrop, the EU lawmakers at the meeting in Brussels reviewed challenges that the bloc faces in the areas of supply chains, critical infrastructure, and the transfer of technology with dual applications.
Overall, China’s full or partial ownership of a sizable number of strategic infrastructure assets in the EU has been a cause of concern for the leadership of the Western countries. Chinese companies have acquired stakes in more than 15 ports in Europe, including in Greece, Belgium, and Spain. Controversy surrounding the recent acquisition of a minority stake in a container terminal in the port of Hamburg in Germany by the Chinese state backed shipping company COSCO has not died down.
The German government headed by Chancellor Olaf Scholz gave a go-head signal to the acquisition of Hamburg-based container terminal by the Chinese shipping company
despite the fact Germany’s national cyber security agency, the BSI had classified the terminal as a critical German infrastructure.
Experts raised their concern over the deal, stating that it would be a reason for a major
security issue as it gives the Chinese government undue influence in the port terminal.
Their worries drew international attention as Europe’s two key ports in Rotterdam and
Antwerp have similar shareholding positions with COSCO. There is a fear that such
crucial strategic infrastructure of the EU may become the target of cyber- attacks,
including for the purpose of espionage by China.
Besides investment in ports, China has acquired more than 350 companies across the EU
in the last 10 years. In 2021 alone, China invested $11.3 billion in the EU, said a study by
Rhodium Group, a New York City-based data analytic and research firm. The
Netherlands received the most Chinese investment, followed by Germany and France.
Total Chinese investment in the EU, including mergers and acquisitions and green-field
investments accounts for $348 billion.
However, China’s constant effort to acquire and own semiconductor factories in the EU,
is giving sleepless nights to the European leaders. Last year, Berlin blocked the sale of
German chip factories–Elmos and ERS Electronic by Chinese firm SI Microelectronics.
Earlier, Germany blocked the takeover of satellite and radar technology firm, IMST by
a subsidiary of state-backed missile maker China Aerospace and Industry Group (CASIC).
In August 2018, it discouraged China’s YantaiTaihai from purchasing Leifeld, a maker
of tools for the nuclear power sector. Earlier in the same year, a German state bank took
a stake in high-voltage grid operator 50 Hertz to stop China’s State Grid from buying it
after it found no alternative private investor in Europe.
Earlier, China’s Advanced Technology &Materials took over German aerospace supplier
Cotesa in 2018. In 2017, China’s HNA Group Co Ltd, acquired a majority 82.5 percent
stake in Frankfurt Airport. In 2016, robotics maker Kuka was purchased by China’s
Midea, while the East Asian country’s carmaker Geely surprisingly purchased a 10
percent stake in Daimler, Germany’s leading car maker.
Geely, the car manufacturer, is owned by Chinese business magnate Li Shufu. It
was China’s first non-state-owned car company which started its business in 1997.
Germany’s machinery maker KraussMaffei Group was acquired by the state- backed
Chinese chemical company, ChemChina for about $1 billion in 2016. At that time,
Reuters had maintained: “The deal is the latest example in recent years of deep- pocket
Chinese companies seeking to gain the technological expertise, distribution network and
branding of western firms, often built up over several decades.”
In 2016, had then US President Barack Obama not blocked takeover of Aixtron SE, a
German chip equipment maker, China’s Fujian Grand Chip Investment Fund would
have taken over the company.
To ensure that the EU is well equipped to identify, assess and mitigate potential risks that
FDI from China may have for the European bloc’s security or public order, the EU
introduced a framework for FDI screening in October 2020.
But so far only two EU member states have a screening mechanism in place. In the given
situation when the Ukraine war has brought about a huge change in the geopolitical
situation of the region, and China has increased its attempt to acquire advancedtechnology and strategic assets, the EU meeting in Brussels on de- risking strategy
assumed high significance.
As it took place at the time when China has increased its espionage activity across Europe.
Recently, the Swiss intelligence agency accused Beijing of turning the country which
houses several UN agencies, into a hub of Chinese spies.
Without giving details as to what kind of security challenge remains to Switzerland from
foreign spies, the European nation’s Federal Intelligence Service (FIS) quoted by New
Straight Times as saying, “The threat to Switzerland posed by foreign (mainly Russian
and Chinese) espionage remains high.”
Swiss city, Geneva serves as a location to headquarters of the United Nations High
Commissioner for Refugees (UNHCR), the United Nations Institute for Disarmament
Research (UNIDIR), the United Nations Institute for Training and Research (UNITAR),
the International Telecommunication Union (ITU), the International Labour
Organization (ILO), the World Health Organisation (WHO), the World Intellectual
Property Organisation (WIPO), the World Meteorological Organisation (WMO), the
United Nations Programme on HIV/AIDS (UNAIDS), the World Trade Organisation
(WTO), the International Trade Centre (ITC) and the International Organisation for
Migration (IMO).
Besides Bern, the Swiss capital serves as headquarters to the Universal Postal Union
(UPO). Switzerland also currently serves as a non-permanent member of the UNSC for
the two-year term. On account of the war in Ukraine, Bern’s decision-making and
presentation on international affairs at the UNSC assume high significance.
While this could be the reason for increased Chinese espionage activities in Switzerland,
last year, German intelligence agencies warned their country of putting profit over
security when dealing with China. They criticised German parliamentarians for not
taking advice from the agencies “seriously,” saying Germany would be better served if
politicians heeded warnings rather than “brushing off intelligence services’ warnings as
scaremongering and grandstanding.”