#EU to hold back on China tech investment ban — for now

The UK government stated early on Wednesday that the decision provided “clarity” on the approach of its close ally. Furthermore, it said it would “consider these new measures closely” as it continued to evaluate any potential implications for national security. 

Meanwhile, the European Union was only marginally less ambiguous in its response. Later in the afternoon, the Commission said that it was “in close contact” with the White House. However, there was no indication that the bloc was looking to emulate the same measures any time soon. 

“We will be analysing the Executive Order closely,” the Commission said in a statement shared with Reuters. “We are in close contact with the US administration and look forward to continued cooperation on this topic.”

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It further added it recognised the significance of the topic, and that the EU and its member states have a common interest in preventing capital and expertise from fueling military and intelligence capabilities of “actors who may use them to undermine international peace and security.” 

Balancing technological trade act

Brussels has been exploring its own ways to constrain flow of technology to China, adopting an economic security control with stronger export controls in June. However, with China constituting the EU’s largest trading partner, it is a tricky field to navigate. 

If the past years of back-and-forth over semiconductor technology have demonstrated anything, it is Beijing’s readiness to retaliate against what it perceives as “technological bullying.” China’s restrictions on rare earth exports threaten to derail not only the nascent chipmaking industry in Europe, but even the EU’s green transition as a whole. 

Markets do not seem to have been especially perturbed by the executive order, which bans new private-equity, venture-capital, and joint-venture investments in advanced semiconductors and microelectronics, quantum technology, and certain AI systems. 

Still, US investors have raised concerns specifically about a potential payback response from China. Indeed, the EU may choose to hold off on any concrete measures, waiting to see what the fallout of the latest move of the US in its complicated relationship to China will be.