New EU Toolkit Has China in Its Sights. Now Comes the Hard Bit

The European Union and its member states are taking bolder steps to boost national security tools and shore up supplies, edging closer to the US strategy of avoiding over-dependence on China and curtailing the advance of its military capabilities.

(Bloomberg) — The European Union and its member states are taking bolder steps to boost national security tools and shore up supplies, edging closer to the US strategy of avoiding over-dependence on China and curtailing the advance of its military capabilities.

But the moves come amid questions on how quickly action can be taken. In some areas, the EU’s discussions are still at an early stage compared to the US and the bloc will need time to think through the issues and identify risks, according to several officials who asked not to be named on a confidential issue.

The EU will later Tuesday release a plan that sketches out proposals to identify security risks, and possibly control key technology exports and curb sensitive investments in future. The EU is also looking to overhaul key supplies where it’s vulnerable – such as in raw materials, semiconductors and car batteries — and ramp up investments in emerging technologies deemed of strategic importance.

EU officials are trying to strike a delicate balancing act. They want to be able to intervene in a targeted way where there are military implications but also maintain broader trade ties to the critical Chinese market. And they want to do all of that in coordination with the US, even though Washington often seeks to move further and faster than Brussels.

Chinese Premier Li Qiang has used a visit to Berlin to appeal to German companies to take the lead on so-called de-risking (reducing dependence). Meanwhile, the EU is preparing to propose a financial aid package of around €50 billion ($55 billion) to support Ukraine over the next few years.

Activating measures to curb outbound investments by the end of the year would be seen as an especially optimistic time line, the officials said. 

Member states would also need to embrace a broader approach to security that looks, as a whole, at exports of crucial goods, investments, and the transfer of technologies and know-how that often accompanies those investments.

Loopholes Warning

Security is mostly the responsibility of national governments and while the proposed strategy doesn’t suggest changing that, it warns that “an uncoordinated accumulation of national controls by member states would create loopholes and undermine the effectiveness of export controls and the integrity of the single market.”

The concern is that if one country bans an export but others don’t, investments will be diverted to that nation and the controls would be ineffective. Similarly, an uncoordinated approach to money flowing into the EU, especially toward critical infrastructure and R&D, opens up vulnerabilities for all.

Any actions need to also be preceded by a thorough risk assessment if they are to get member state buy-in, one of the people said.

Export Controls

German Chancellor Olaf Scholz said Monday he’s in favor of export controls on some high-tech goods to help boost economic security. Speaking at a business conference ahead of Tuesday’s Germany-China government consultations in Berlin, Scholz also indicated that his administration would “take a closer look when it’s about defense and weapons.”

“We don’t want certain military equipment to be delivered from China to Russia, actually from any country, and we’re making this position clear,” Scholz said. “And it’s about technology used in surveillance, one has to be careful in this area.”

EU leaders are set to discuss the economic security draft and hold a discussion on China when they meet in Brussels next week. Draft conclusions seen by Bloomberg currently state the leader will stress the need “to enhance the union’s economic security and resilience and reduce strategic dependencies.”

‘Security Challenges’

They will also call for “proportionate, precise and targeted answers to security challenges while ensuring a balance between an open economy and the defense of the Union’s interests,” according to the draft, which may change.

Another challenge is that the issue of who should develop advanced weapons is intertwined with where electric vehicles and phones are manufactured. Implementing a strategy is particularly complex with China where civil and military developments are blurred, especially for so-called enabling technologies with increasing military implications like quantum computing, artificial intelligence, semiconductors, 6G and biotech.

At the same time, many European firms want to continue to sell into China’s massive market despite the often intrusive strings attached and the bloc as a whole depends on Beijing for key supplies.

Finding a balance between all these factors in a way that is suitably narrow and centered on Europe’s own interests won’t be easy, one of the officials said. Some member states may feel inclined to take a protectionist route while others simply follow what the US proposes, the official added.   

–With assistance from Michael Nienaber and Samuel Stolton.

More stories like this are available on

©2023 Bloomberg L.P.