EU Plans To Force Chinese Companies To Transfer Technology

The core objective is "to protect Europe's industry, especially the automotive sector." If this policy is implemented, it will completely change the way the EU handles investments from China.

Chinese Foreign Ministry spokesperson Lin Jian stated that China opposes forced technology transfers and discriminatory practices disguised as efforts to enhance competitiveness.

The EU's stance toward China has gradually hardened in recent months.

Last week, the European Commission proposed imposing a 50% tariff on steel imports exceeding the quota to address the issue of global overcapacity led by China.

The Dutch government has exceptionally invoked a 70-year-old law to forcibly take over the Chinese-controlled chip manufacturer Nexperia, aiming to ensure Europe's "unrestricted access" to critical chips.

Behind these actions is Europe's deep-seated anxiety about supply chain security amid geopolitical risks. EU officials are particularly concerned that China's latest rare earth export controls will cause "significant disruption" to critical supply chains.

According to the latest regulations, the overseas sale of any products originating from China or utilizing China's rare earth refining and separation technology must obtain an export license from the Ministry of Commerce of China.

Foreign companies exporting products containing even trace amounts of Chinese rare earth materials must obtain prior approval. This is the first time China has extended the effectiveness of its export control measures overseas.

The relevant data highlights Europe's vulnerability: Germany and Turkey's dependency on rare earth imports from China is as high as 91% and 93%, respectively, while the dependency for the UK, South Korea, and the United States is also at 89%, 80%, and 78%.

Europe's major economies face greater exposure than the United States regarding rare earths, a key strategic resource.

China's control list has also included lithium battery materials, cells, and production equipment. Companies in the new energy industry chain may subsequently be affected by related countermeasures from the European Union.

This is the first time that battery cells, materials themselves (rather than just technology), and equipment have been included in regulation. As a cornerstone of new energy, the lithium battery industry has been elevated to a strategic importance equivalent to that of "rare earths," which are vital to the chip industry.

Last week, U.S. President Trump threatened to impose an additional 100% tariff on Chinese goods and to implement export controls on "any and all critical software" starting November 1.

The key unresolved question at present is whether the current series of trade frictions are negative factors and bargaining chips in short-term market games, or whether they signal a long-term structural constraint that will ultimately lead to a broader and more painful restructuring of the global supply chain.

The answer may have to wait until after the APEC summit at the end of October. By then, leaders of major global countries may meet and seek a window of opportunity to ease tensions.