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Europe unveils ‘de-risking’ strategy but states divided on China

Proposal to defend technologies like AI, chips likely to face fierce debate

The European Commission on Tuesday outlined a “de-risking” strategy designed to develop a resilient economy that is less reliant on China in critical technologies, as European Union member states remain divided on how to approach relations with Beijing.

The proposal from the EC — the European Union’s executive body — aims to increase scrutiny of foreign direct investments, exert export controls to fend off “economic coercion” and address risks in industries that have military applications such as quantum computing, advanced semiconductors and artificial intelligence. While the strategy does not mention China by name, its language reflects criticism frequently leveled at Beijing by Europe, the U.S., and others.

The proposal adds further detail to a de-risking strategy originally laid out by EC President Ursula von der Leyen on March 30. Europe has to be “clear-eyed about a world that has become more contested and geopolitical,” von der Leyen said on Tuesday. “The topic of economic security has become a priority for us and for many of our partners. And today, Europe becomes the first major economy to set out a strategy on economic security.”

But there are signs that EU member states are not united in their views of China.

Berlin is currently hosting Chinese Premier Li Qiang, who held talks on Tuesday with German Chancellor Olaf Scholz. The German leader was quoted by Reuters as saying “direct dialogue, personal talks, a real discussion” with China was important, while Li said that Beijing hoped to take bilateral ties “to a new level.”

China is Germany’s biggest trading partner. Berlin had a trade deficit of 80 billion euros (around $87 billion) with the country last year, the largest figure since 1990.

It is understood that both countries signed more than 10 deals during Li’s visit, in fields such as advanced manufacturing and environmental protection.

Li will also attend a climate financing summit in Paris on Thursday and Friday, and is expected to meet with French President Emmanuel Macron.

Macron has indicated that he wants France and Europe to deepen ties with China. After a three-day visit to China in April, he said that France should not follow the U.S. in responding to Beijing’s policies in the Taiwan Strait and that it was not in Europe’s interest to be “caught up in crises that are not ours.”

Italy, however, is taking a more cautious approach. On Monday, the Italian government barred Pirelli’s largest shareholder, China’s Sinochem, from appointing the tiremaker’s CEO or setting company strategy, over concerns about Chinese influence.

The EC strategy calls on EU member states to consider new export controls over equipment that could have civil and military uses and tighten scrutiny of investments.

But Alicia Garcia Herrero, senior research fellow at Brussels-based European think tank Bruegel, told Nikkei Asia there was “no consensus” on the EC’s plans to restrict outbound investments.

“I don’t think this [outbound investment screening] is a good solution unless it is really targeted to, for example, the fusion technology,” she said.

The EC’s strategy will be discussed by the EU’s 27 heads of states on June 29-30, as well as by lawmakers. They are expected to carry out a risk analysis of the main challenges facing the EU, including the resilience of supply chains, risks to critical infrastructure, the transfer of technology with military or intelligence applications, and the risk of non-EU countries exploiting economic dependencies.

Source: Nikkei