China’s Influence in the The European Union (EU) & the United Kingdom (UK):
The amount of Chinese foreign direct investment (FDI) in the European Union and United Kingdom had been rising since 2000, amounting to nearly $180 billion at the end of 2019. In particular, Chinese FDI increased dramatically after the 2008-2009 global financial crisis, translating in many cases into influence over European countries’ policies toward China.
Chinese annual FDI in the EU and UK peaked in 2016 at approx. $41 billion. It has since declined amidst a global slowdown in China’s outward investment and due to greater European scrutiny. In 2019, Chinese FDI in Europe amounted to approx. $13 billion.
Greater European scrutiny was sparked in part by a jump in Chinese acquisitions of European companies in 2016, specifically that of premier German robotics company, KUKA. The sale exposed the risk China posed to Europe’s technological pre-eminence and national security and underlined the need to shield strategic parts of the economy.
In its March 2019 strategy paper, the EU labeled China “a systemic rival” in some areas, a significant change from previous EU statements. That same month, the EU approved a new foreign investments screening framework to provide its member states tools to better protect their strategic sectors.
Despite this more assertive approach, the EU seeks to maintain economic ties with Beijing. However, Beijing’s handling of the COVID-19 pandemic has increased calls in the EU and the UK for a rethink of relations with China.
China’s Foreign Investment in the EU and UK:
Two-thirds of EU countries have signed agreements to cooperate in China’s Belt and Road Initiative, including Italy, Greece, Portugal, and the Central & Eastern European states.
China initiated the 17+1 framework to expand cooperation between Beijing and Central & Eastern Europe. Italy and Greece are also members.
More than half of Chinese FDI in the EU since 2000 has been in its largest economies: the United Kingdom, Germany, Italy, and France.
Chinese investments in the EU and UK have been concentrated in the transport, information and communications technology (ICT), energy, and real estate sectors.
Despite growing European scrutiny around Chinese investment in tech-related sectors, ICT has been among the top three sectors in terms of Chinese investment volume since 2015.
China’s Foreign Investment in the EU and UK’s Strategic Infrastructure:
China has sizeable investments in British, Portuguese, Italian and Greek energy systems as well as airports in the UK, Germany and Slovenia.
China’s largest state-owned nuclear company (CGN), which is on the US export blacklist for stealing U.S. tech for military use, is heavily involved in the UK’s nuclear power industry.
Chinese involvement in European ports – including in Belgium, the Netherlands, Greece, Italy and Spain – have dramatically increased over the last decade. As of 2018, ports in which Chinese state-owned companies have stakes handled about 10% of Europe’s total shipping container capacity.
Chinese state-owned COSCO owns a controlling stake in Greece’s port of Piraeus. Beijing hopes to turn the site into a main entry point for China’s exports to Europe.
85% of Hungary’s largest ever infrastructure project, a $2.5 billion railway link to Serbia, will be financed with a loan from China’s ExIm Bank. Critics say the project will never turn a profit, but will expand China’s influence in Hungary.
China’s investment in European strategic infrastructure has the potential to interfere with allied military mobility—the ability of NATO to move troops and equipment across Europe.
Huawei and the EU and UK’s 5G Networks:
The EU issued guidance to its members in January 2020 that recommends they should limit high-risk 5G vendors, a category that includes Huawei, but stops short of advising an outright ban on the firm.
Huawei is pitching lucrative deals and sending medical supplies to European governments in the hopes of fending off complete bans.
- It has proposed multimillions in investments for research facilities in countries including the Netherlands, Germany, and the UK. In France, Huawei will invest ~$220 million to build its first manufacturing site in Europe. In Brussels, it operates a “cybersecurity transparency center.”
- Huawei has donated masks to European states – including Italy, Ireland, Czech Republic, Poland, Netherlands, and Spain – during the COVID-19 pandemic.
After facing significant pressure from the U.S. and senior members of his own party, British PM Boris Johnson banned the purchase of new Huawei 5G equipment after 2020 and mandated the removal of all Huawei 5G kit from the UK’s networks by 2027.
Estonia, Romania, Poland, the Czech Republic and Slovenia have signed 5G security pacts with the U.S.
China’s Semiconductor Industrial Policy Targets the EU and UK:
As the U.S. has tightened its export controls and investment restrictions, Beijing has turned to Europe to advance the development of its semiconductor industry, a key element of its “Made in China 2025” plan.
Huawei has launched a new collaboration with French-Italian chipmaker STMicroelectronics to co-design mobile and automotive-related chips.
The U.S. mounted an extensive and successful pressure campaign to block Dutch semiconductor equipment company ASML from selling its most advanced machine to a Chinese customer.
Chinese-backed investment company — Canyon Bridge — bought British graphics chipmaker Imagination Technologies in 2017. In April 2020, an attempt to fill the company’s board with directors from a Chinese government investment fund was only stopped after an intervention by the British government.
It’s believed that in 2016 two Chinese firms colluded to engineer the decline in the stock price of Aixtron, a German manufacturer of equipment used in the semiconductor manufacturing process, in order to facilitate a takeover by a Chinese investor. This resulted in Berlin and Washington blocking the transaction.
The Dark Side of China’s R&D Collaborations in the EU and UK:
While China’s equity investments in the EU and UK have dropped since 2016, non-equity types of activity have grown. In particular, there recently has been an expansion in R&D collaborations between Chinese firms and European companies and universities.
However, some of these collaborations have contributed to the CCP’s military-civil fusion policy and hi-tech policing efforts in Xinjiang and elsewhere in China.
BGI – a Chinese biotech giant involved in the construction of the “Xinjiang gene bank” – has a research center in Denmark.
The UK’s Queen Mary University is collaborating with several Chinese companies on a joint research center that studies THz technology, which the Chinese military is using to develop anti-stealth radars.
Valletta (Malta), Monaco, Sardinia (Italy) and Duisburg (Germany) have all collaborated with Huawei on developing “smart city” technology.
China’s Soft Power in the EU and UK:
There are nearly 200 Confucius Institutes across all of Europe, including 30 in the UK, 19 in Germany, 18 in France, 12 in Italy, and eight in Spain. Confucius Institutes are Chinese-state funded institutions that are embedded in universities throughout the world to promote the CCP’s political agenda.
ChinaWatch is a paid media insert prepared by the China Daily, China’s most important English-language daily. ChinaWatch appears in newspapers across all of Europe, including in Germany, France, Belgium and Spain.
- The UK’s Telegraph ceased publishing ChinaWatch in April 2020 amid growing scrutiny of how Beijing is using the COVID-19 pandemic to grow its influence in English-language media.
Beijing’s media engagement strategy in Europe includes promoting cooperation between Chinese state media and European media. For example, in 2017, China’s state-run Xinhua News Agency partnered with the German Television News Agency on a program called “Nihao Deutschland” that promotes sympathetic views toward China.
- Source: U.S.-Economic and Security Review Commission, Background Memo on Beijing’s Tools for Advancing its Influence in Europe, written by Matthew Southerland, May 5, 2019.
*Last Updated: 9/9/2020