How would you describe the current state of Chinese-EU relations in respect of high technology sector?
The EU and China have traditionally cooperated a lot in high technology. However, this used to be mostly a one-way street, with European high-tech companies going to China, building plants or selling their products, and transferring some technology. After China has, in recent years, replaced some traditional EU powerhouses in key technologies like the high-speed rail industry, European companies are increasingly in China for innovation. As a pre-requisite to market access, China often requires or encourages localization of the supply chain and especially innovation, and there are some areas like AI where China leads in front of the EU.
What influence does China’s ‘Made in China 2025’ initiative have on its relationship with the EU in the tech industry?
China’s “Made in China 2025” initiative is not mentioned a lot anymore. The underlying principles, and the focus on making China a leader in smart industry and indigenizing supply chains have only strengthened in the meantime. For Europe, China used to be a very complementary economy, with low labor costs and little automation. Now, increasingly, China is becoming a competitor also in high-tech and high-skill areas.
Could you discuss the importance of cooperation versus competition in the EU-China relationship and high-tech industry in particular?
Chinese and EU companies are increasingly competing in third countries in high-tech. Huawei is a key competitor to Nokia and Ericsson, not only in China and Europe, but increasingly also in Africa, Latin America and Asia. Competition in these areas is partly problematic, because Huawei benefits significantly from government subsidies, a protected home market, and Chinese government financing for infrastructure outside of China. Cooperation is still important, as Europe and China are key markets.
Can you comment on how Europe’s strengths in tech innovation could complement or clash with China’s ambitions?
In many areas, Europe is very good in fundamental research, while China tends to be leading in many application areas. In this way, Europe and China could be complementary. However, China’s ambition is very clearly to become leading in many areas, and to become technologically independent. Semiconductors are a very good example for where this clashes with Europe’s strength. Europe is great in power semiconductors, with Infineon and Bosch. China has in recent years tried to become independent in that area, taking over European company Silex. Another example is lithography, where Europe is currently leading with ASML, but China is very clearly trying to replace ASML with SMEE.
How do regulatory differences between the EU and China affect their collaborations in the high-tech and AI?
There are some key differences affecting collaborations in high-tech and AI between China and the EU. Data localization laws, and the Data Security Law in China is one such example that could make collaboration especially in AI and other data-intensive areas problematic. If data contains personal information about Chinese citizens, it is very difficult to export this data to Europe, for instance. Often, Chinese data can only be stored in Chinese clouds. Increasingly, EU and US regulation also affects collaborations, e.g. when hardware used to train AI models cannot be exported to China.
What steps should the EU take to balance the risks and rewards of engaging with China in the high-tech and AI sectors?
There are some steps the EU has already started to take, but these need to be strengthened and reinforced. Governments need to have an idea of what collaborations actually take place, and researchers and companies need to be sensitized and informed about changes happening in China with regards to military-civil fusion. One key step Europe should do much more is to define tech sovereignty and define areas where Europe is strong, and wants to stay strong.
Can you share some insights into how the competitive landscape has changed in the space industry between China and Europe?
A couple of years ago, Europe was very clearly the senior partner in any space cooperation with China. China joined Europe’s Galileo project, a cooperation which ended in disharmony, partly because China was hoping for more technology transfer. In recent years, ESA prepared for some of its astronauts to be trained in China to join their space station. While this cooperation (and all other ESA-CNSA cooperation) has been halted as a result of Russia’s invasion of Ukraine, the parameters of such cooperation would have been very different. China is now one of the top-3 space countries, especially with regards earth orbit technology. ESA still has more experience with inter-planetary missions, but China’s space budget see it catching up even there.
How do you see the EU-China relationship in the space industry evolving over the next decade?
In space, it will be increasingly impossible to cooperate closely with the US and China at the same time. As a security ally and due to Europe’s traditional close ties with the US in space, it is almost inconceivable for Europe to choose China in such an environment. This is also because most space technology is by its nature dual-use, and space programs in Europe and China are both dominated by government agencies. Cooperation will thus be much more problematic going forward.
Can you comment on any potential implications of the China-EU tech relationship on global tech standards and regulations?
China and the EU’s approaches to regulating technology share quite a few features, being mostly risk-based, but differ in the key question of goals and state role. China’s regulation of data has taken many parts from the EU’s GDPR. There is some consensus that China and the EU share with regards to data privacy, but the big difference is whether data privacy laws should also apply to the government. China and the EU also compete in the regulatory domain, with the EU’s AI Act choosing a horizontal approach, while China has been using a vertical approach, with different regulations for different technologies. Internationally, China’s striving for tech sovereignty and its desire to play a leading role in tech standardization could lead to more difficulty. We have seen China try to block consensus in some of these standardization bodies.
Antonia Hmaidi is an analyst at Mercator Institute for China Studies (MERICS). She researches China’s pursuit of tech self-reliance.