Earlier this week, the European Union disclosed plans that it could force Chinese firms to hand over technology and intellectual property to European companies if they want to operate locally. That is ironic as it seems only yesterday that Westerners were accusing China of forced tech transfer and violating intellectual property rights.
The latest push by Brussels could apply to mainland companies seeking access to key digital, green tech and manufacturing markets such as electric cars, wind turbines and batteries. They could also be required to satisfy preset levels of use of EU goods or labour.
The aggressive plan followed the Dutch government’s seizure of Nexperia, a wholly Chinese-owned semiconductor maker on economic security grounds. The reason given is that the chips produced by Nexperia need to be prioritised for use in Europe in cases of supply disruptions, though US pressure was no doubt a contributing factor. While international headlines focused on Beijing’s latest export controls of rare earths and its escalating trade war with Washington, another trade and tech war with Europe is starting and could become just as nasty.
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The Dutch seizure of Nexperia has elicited an angry response from Beijing, which is still smarting over the Dutch firm ASML’s refusal to sell its most advanced chipmaking equipment or service the systems already sold to Chinese customers, again under US pressure.
The Europeans seem ready for a trade war of their own with China, partly because Washington has demanded it. However, two other factors have collided and brought this about.
Europe is lagging in the races between the two superpowers over advanced chips and artificial intelligence. As part of the European Chips Act, which was finalised in 2023 and has allocated billions of euros to subsidise chip manufacturing and research on the continent, the EU aims to be more independent of the United States.
Meanwhile, the Chinese domestic market has become highly competitive and crowded, and profit margins are thinning. With official encouragement, many firms, especially those in the tech fields, need to go global in search of new markets. But with the rise of trade protectionism and geopolitical tensions, the EU is determined to resist an onslaught of Chinese exports and investment. The message is becoming clear: the Europeans will demand their pound of flesh, such as tech transfer, to open their markets selectively.
There is a limit to how far the EU can play hardball. Germany still has to sell to China. As a key trading partner to big EU states, China maintains enormous leverage. It probably won’t be long until Beijing starts launching regular investigations into intellectual property theft and violations by Western agents.
