RUTHFULLY YOURS

• A staggering 40% out of 650 Chinese investments in Europe in the years 2010-2020, according to Datenna [a Dutch company that monitors Chinese investments in Europe], had “high or moderate involvement by state-owned or state-controlled companies.”
• When the Chairman of the UK parliament’s Foreign Affairs Committee, Tom Tugendhat, wrote that Chinese ownership of the British microchip plant, Newport Wafer Fab, “represents a significant economic and national security concern”, UK Business Secretary Kwasi Kwarteng responded that the deal had been “considered thoroughly”. Only after considerable pressure did British Prime Minister Boris Johnson agree to a national security review of the sale.
• The European Court of Auditors, an EU institution that oversees EU finances, has found that gaining an overview of Chinese investments in the EU is difficult because of the lack of comprehensive data; it seems no one is recording it.
• Efficient systems for blocking foreign investments based on national security concerns also appear either to be lacking or simply not used sufficiently.
• The “strictest screening frameworks” clearly are not stopping China.
• What appears to be urgently needed in Europe now is a deeper understanding of the threat that China poses, as well as the political will to act on it. Action is urgently needed to block investments that serve up Europe’s strategic assets on a silver platter to China’s state-owned companies, which the Chinese Communist Party then use to advance its expansionist ends.

For more than a decade, China has been stealthily buying up European companies in strategic sectors, particularly in technology and energy. China appears to be using these European assets to help fulfil the Chinese Communist Party’s (CCP) ambitions of becoming a global force, technologically independent of the West and ultimately supplanting the US as the world’s economic, political and military superpower.

China has been covering up its European purchases by passing them off as ostensibly commercial investments. It has been hiding the state-owned companies involved in the investments behind “layers of ownership, complex shareholding structures and deals executed via European subsidiaries,” according to Datenna, a Dutch company that monitors Chinese investments in Europe. A staggering 40% out of 650 Chinese investments in Europe in the years 2010-2020, according to Datenna, had “high or moderate involvement by state-owned or state-controlled companies, including some in advanced technologies”.

When, for instance, the Chinese took over the Italian drone maker, Alpi Aviation, the Italian Air Force had already revealed the strategic importance of Alpi’s drones, by using them in Afghanistan. In 2018, a company registered in Hong Kong, Mars Technology, bought a 75% stake in Alpi Aviation. Italian authorities knew nothing about the sale and only found out about it in 2021, subsequently opening an inquiry into it. The Italian authorities found that Mars Technology was just a shell company that could be traced to two Chinese state-owned companies. One of them was the China Railway Rolling Stock Corp, the world’s largest supplier of rail equipment. The purpose of the acquisition, it would appear, was the appropriation by the Chinese state of Alpi’s drone technology, which, soon after the sale, the Chinese began transferring to China. “It’s a textbook case,” said Jaap van Etten, chief executive of Datenna. “This is the strategy of the Chinese state, pushed by the Chinese government.”

More recently, the Chinese took over Newport Wafer Fab, the UK’s largest producer of semiconductors, also known as microchips, essential in electronics from smartphones to high-tech weapons. In July 2021, Nexperia, ostensibly a Dutch company, bought Newport Wafer Fab. Nexperia, however, is owned by Wingtech Technology, a Chinese company with close links to the Chinese state. According to Datenna, 30% of Wingtech Technology is owned by Chinese government entities. The UK government, despite that, did not appear to understand the threat. The sale, despite protests to UK Business Secretary Kwasi Kwarteng, went ahead. When the chairman of the UK parliament’s Foreign Affairs Committee, Tom Tugendhat, wrote that Chinese ownership of the British microchip plant “represents a significant economic and national security concern”, Kwarteng responded that the deal had been “considered thoroughly”. Only after considerable pressure did British Prime Minister Boris Johnson agree to a national security review of the sale.

The European Court of Auditors, an EU institution that oversees EU finances, has found that gaining an overview of Chinese investments in the EU is difficult because of the lack of comprehensive data; it seems no one is recording it.

Efficient systems for blocking foreign investments based on national security concerns also appear either to be lacking or simply not used sufficiently. Only 18 European countries – among them Germany, France and Spain — have introduced or updated national mechanisms for screening foreign investments, but apparently they are not always used. Since 2012, Italy, for instance, has used its mechanisms only four times — two of them in the past 9 months.

According to Datenna, Spain’s investment screening mechanism is “one of the strictest frameworks within Europe”. Despite that, China has still managed to make large inroads into Spain’s energy and nuclear sector.

In 2020, two Spanish companies, Empresarios Agrupados and Ghesa, which design and construct nuclear plants, were taken over by the China Energy Construction Group Planning and Design. That company, it just so happens, is closely linked, via its parent company, China Energy Engineering Group, to the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), an entity of the Chinese government. SASAC owns almost 100% of the shares in China Energy Engineering Group — the parent company of the Chinese acquirer of the two Spanish nuclear design companies. The acquisition was reportedly one of the largest Chinese takeovers of Spanish infrastructure companies ever. Furthermore, also in 2020, Reuters reported that China’s state-owned energy and infrastructure giant, China Three Gorges, had agreed to buy 13 Spanish solar plants.

The “strictest screening frameworks” clearly are not stopping China.

What appears to be urgently needed in Europe now is a deeper understanding of the threat that China poses, as well as the political will to act on that threat. Action is urgently needed to block investments that serve up Europe’s strategic assets on a silver platter to China’s state-owned companies, which the Chinese Communist Party then uses to advance its expansionist ends.

Judith Bergman, a columnist, lawyer and political analyst, is a Distinguished Senior Fellow at Gatestone Institute.