What changed

MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION

SUGGESTIONS

on the security and defence Implications of China influence on critical infrastructure in the European Union

The Committee on International Trade calls on the Committee on Foreign Affairs, as the committee responsible, to incorporate the following suggestions into its motion for a resolution:

(2023/2072(INI))

1. Highlights the fact that, in 2022, China was the EU’s second largest trade in goods partner; expresses concern about the increasingly unbalanced trade and investment relationship between the EU and China, which is also highlighted by the EU’s record trade deficit of EUR 396 billion in 2022 and its dependence on Chinese imports and investments in some critical sectors; highlights China’s unbalanced international trade policy in the context of its dual circulation strategy; asks the Commission to raise the EU’s concerns with China on its managed trade practices;

The European Parliament,

2. Is mindful that the positive image that products originating in the EU enjoy among the growing Chinese middle class, which already outnumbers the entire population of the EU, has been key to the success of EU exports to China, which exceeded a combined value of EUR 230 billion in 2022;

– having regard to the Treaty on the Functioning of the European Union,

3. Notes that China was the seventh biggest investor in the EU in 2021 and that Chinese investments in Europe continued to decline in 2022, reaching a 10-year low of EUR 7.9 billion, following a different pattern than the global recovery in foreign direct investment (FDI) flows seen in 2021; notes the shift in Chinese FDI from mergers and acquisitions towards greenfield investments, which have reached a 10-year high, including in battery technology, which is a key sector for the green transition; notes that, according to an evaluation by the European Court of Auditors on 2000-2020, Chinese FDI has also shifted towards strategic areas such as transport and infrastructure, information and communication technologies and energy; welcomes undistorted Chinese investment provided that it does not harm security or public order; emphasises that, at the same time, adequate investment screening must be pursued;

– having regard to Title V of the Treaty on European Union, in particular Chapter Two, Section Two thereof on provisions on the common security and defence policy,

4. Points out that the political system in China provides for investors based on a combination of private and state actors or of state-owned enterprises, closely linked to the ruling party, and therefore brings ambiguity regarding the interest behind their investments in third countries’ critical infrastructure;

– having regard to the ‘Strategic Compass for Security and Defence – For a European Union that protects its citizens, values and interests and contributes to international peace and security’, approved by the Council on 21 March 2022 and endorsed by the European Council on 25 March 2022,

5. Acknowledges the conclusions on China adopted by the European Council at its meeting of 29 and 30 June 2023; is equally convinced that the trade and investment relationship between the EU and China is of strategic importance, bears strategic challenges and should be fair, transparent, sustainable, reciprocal, balanced and rules-based with international labour and environmental agreements at its core, whether at a bilateral level or under the multilateral trading system; notes that China should support ambitious reform of the World Trade Organization in this context;

– having regard to the Versailles Declaration, adopted at the informal meeting of the Heads of State or Government on 11 March 2022,

6. Regrets that this is not the case today, considering, in particular, the longstanding absence of reciprocity owing to the practices of the Chinese Government and the companies that it controls; believes that the EU trade toolbox, with autonomous measures such as trade defence instruments, FDI screening, the international procurement and foreign subsidies instruments, the Enforcement Regulation, the Critical Raw Materials Act, the Net-Zero Industry Act, the anti-coercion instrument as well as the European economic security strategy, is of major importance when it comes to foreign ownership of, control of or access to EU critical infrastructure; calls on the Commission to fully implement such measures in order to address the unbalanced trade and investment relationship and mitigate EU vulnerabilities; notes that Chinese investments in the EU should be in line with EU and national law; advocates strong EU action against unfair Chinese regulations affecting trade and investment;

– having regard the joint communication from the Commission and the High Representative of the Union for Foreign Affairs and Security Policy of 20 June 2023 on European economic security strategy (JOIN(2023)0020),

7. Emphasises that trade and investment should be key drivers of sustainable growth, job creation and innovation and that the EU should therefore maintain its economic openness; stresses, however, that a strategic balance must be found between, on the one hand, the open character and investment attractiveness of the EU single market, and, on the other hand, the defence of EU critical infrastructure and autonomy, considering the EU’s security vulnerabilities, especially concerning economic coercion or threats to the integrity of EU critical infrastructure;

– having regard to Directive (EU) 2022/2557 of the European Parliament and of the Council of 14 December 2022 on the resilience of critical entities and repealing Council Directive 2008/114/EC (Resilience of Critical Entities Directive),

8. Acknowledges that, in certain cases, foreign trade and investment can create security vulnerabilities, including with regard to foreign ownership of, control of or access to EU critical infrastructure;

– having regard to Directive (EU) 2022/2555 of the European Parliament and of the Council of 14 December 2022 on measures for a high common level of cybersecurity across the Union, amending Regulation (EU) No 910/2014 and Directive (EU) 2018/1972, and repealing Directive (EU) 2016/1148 (NIS 2 Directive),

9. Is concerned about China’s assertive geopolitical and economic rise, which has a considerable impact on global economic and political developments, particularly in the Global South, through its Belt and Road Initiative (BRI); calls on the Commission and the Member States to screen with particular attention China’s acquisitions of critical infrastructures in the Western Balkans and the EU neighbourhood countries; calls on China to increase transparency on BRI projects, given the numerous BRI loans that have underperformed and become financially unviable;

– having regard to the Council Recommendation of 8 December 2022 on a Union-wide coordinated approach to strengthen the resilience of critical infrastructure,

10. Stresses that, as a reliable partner, the EU should engage on an equal footing with partner countries, building long term, mutually beneficial partnerships; calls on the Commission and the European External Action Service to ensure that EU investments, notably via Global Gateway projects, in partner countries support them in their own just and sustainable transitions, delivering benefits on the ground in line with international climate agreements, International Labour Organization conventions, the EU Common Security and Defence Policy and international humanitarian law and human rights;

– having regard to the Vilnius Summit Communiqué, issued by the NATO heads of state and government participating in the meeting of the North Atlantic Council in Vilnius on 11 July 2023,

11. Welcomes the new ‘de-risking’ approach in the proposed European economic security strategy of 20 June 2023, which aims to maximise the benefits of the EU’s economic openness and to protect, promote and strengthen the EU’s open strategic autonomy, while minimising the risks resulting from economic dependencies and their possible weaponisation, and foreign control of or influence over critical infrastructure; welcomes the fact that the strategy explicitly recognises that risks to the physical and cyber security of critical infrastructure are key security vulnerabilities for European economies; is highly concerned by the growing number of EU-based businesses that have been targeted for blackmail, industrial espionage, sabotage, or trade-relevant data theft; is equally concerned by the fact that China has become the second most common country of origin of these attacks; is convinced that the protection of critical infrastructure should be a key element in the implementation of the strategy; calls on the Commission and the Member States to deliver on open strategic autonomy in all fields where the EU risks overdependence on China owing to its dominant position;

– having regard to Regulation (EU) 2023/XXXX of [date] of the European Parliament and of the Council establishing a framework of measures for strengthening Europe’s semiconductor ecosystem (Chips Act),

12. Underlines that EU responses must be built around an augmented understanding of the relevant strategic picture centred on cross-policy and cross-national threat assessments and vulnerability studies on critical infrastructure; is of the opinion that a decentralised or lacunal perception, lacking clear visibility and scrutiny over projects with strategic significance for Europe’s defence and security, could greatly harm the Union’s geopolitical interests; recalls vulnerabilities linked to foreign interference, specifically in the information space, and the interplay between FDI projects and information manipulation operations by malign foreign actors;

– having regard to the Commission proposal of 15 September 2022 for a regulation of the European Parliament and of the Council on horizontal cybersecurity requirements for products with digital elements and amending Regulation (EU) 2019/1020 (COM(2022)0454),

13. Urges the Commission and the Member States to ensure that the main use of EU infrastructures is preserved and protected in order to allow for the normal development of EU economic activity and trade, notably transport (ports, airports, rail and roads), energy and telecommunications infrastructures; calls on the Commission to periodically report to Parliament on:

– having regard to Rule 54 of its Rules of Procedure,

(a) the detection of the possible dual use of strategic infrastructures that provide logistical and intelligence support to China;

– having regard to the opinion of the Committee on International Trade,

(b) the full respect of EU trade legislation, especially concerning due diligence, anti-coercion and goods made with forced labour entering the EU market;

– having regard to the report of the Committee on Foreign Affairs (A9-0000/2023),

14. Calls on the Commission, in coordination with the Member States, to design a rapid response mechanism for the detection of the dual use, or misuse, of infrastructures in the EU under Chinese ownership, participation or concession, that could be used to terminate the rights of concession and/or suspend the capacity of domain in the cases of ownership and participation;

A. whereas the recent joint communication on a European economic security strategy focuses on minimising the risks arising from certain economic flows in the context of increased geopolitical tensions and accelerated technological shifts, while preserving maximum economic openness and dynamism;

15. Calls on the Commission and China to explore coordinated ways to boost trade and investment, with the aim of better adapting China to EU legislation and to international and multilateral trade provisions;

B. whereas the Resilience of Critical Entities Directive and the NIS 2 Directive provide a comprehensive legal framework to strengthen both the physical and digital resilience of critical infrastructure, including that related to energy, transport, health, digital infrastructure, water and food;

16. Recalls that the Regulation on the screening of FDI addresses risks to security and public order resulting from investments from outside the EU; notes that critical infrastructure is among the factors that may be taken into consideration by the Member States or the Commission when determining whether an investment is likely to affect security or public order; reiterates the key added value of the screening mechanism as a pertinent tool that gives the EU and the Member States a better strategic overview and situational awareness of the trends, targets, means and methods deployed by foreign actors to increase their economic and political influence; is strongly concerned by the fact that not all Member States have in place or use mechanisms for screening foreign investment in critical infrastructure;

C. whereas since the Council Recommendation of December 8 2022 was issued, targeted actions are already being carried out to ensure a common EU response to incidents, including by strengthening coordination with NATO through the EU-NATO Task Force on the resilience of critical infrastructure embedded in the NATO-EU Structured Dialogue on Resilience;

17. Calls on the Commission to consider ways of making its opinions on FDI screening more impactful, in order to avoid distortions of the single market and a race to the bottom among Member States, and fit for purpose in the current global security context; calls on the Commission and the Member States to increase harmonisation, including by building appropriate expertise, and to fully implement the FDI screening mechanisms; calls on the Commission and the Member States to pay attention to the investments by and political influence of non-EU companies, which could be controlled by China; believes that there is scope and the need for the Regulation to be strengthened in its upcoming review at the end of the year; encourages the Commission to present an ambitious legislative proposal on a revised Regulation addressing all the loopholes that have emerged during its implementation, and to swiftly evaluate the possibility of a legislative proposal on a screening mechanism for outbound investments; recommends building the proposed outbound investment screening mechanism on an impact assessment that includes appropriate consultation with businesses to minimise any potential negative consequences on European competitiveness;

D. whereas the coercive policies and the growing assertiveness of the People’s Republic of China (PRC), including its aggressive stance towards Taiwan, as well as the social and economic consequences of the COVID-19 pandemic and the Russian war of aggression against Ukraine have exposed the EU’s vulnerabilities and reaffirmed the need to ‘de-risk’ its relations vis-à-vis the PRC and other non-democratic third countries;

18. Highlights the role of the EU as a promotor of quality infrastructure projects abroad, through initiatives such as the Global Gateway or the G7 Partnership for Global Infrastructure and Investment; underlines the EU’s need to deliver on its value-based and sustainability-driven rhetoric on international infrastructure projects, acknowledging the vital geostrategic role such programmes can play at the level of diversification, supply chain resilience, standard setting and regulatory alignment;

E. whereas China’s acquisition of critical infrastructure, especially in the EU’s neighbourhood, including the Western Balkans, poses an increasing risk to the trade-security nexus;

19. Calls on the Commission and the Member States to strengthen EU strategic autonomy, notably by building diversified, secure and resilient supply chains and by increasing its actions in key areas such as research and development, cutting-edge technologies, critical raw materials, reindustrialisation and new infrastructures;

F. whereas the Sino-Russian strategic partnership continues to grow, including in the areas of technology and military capability transfers;

20. Argues that a key area of EU critical infrastructure is its network of research institutes and research and development facilities, which play an important role in the EU’s ability to deliver on its green and digital transitions, alongside key arenas such as space defence; recalls the security vulnerabilities linked to forced technology transfers, intellectual property theft and knowledge leaks, both in the EU and abroad; calls for increased vigilance when accounting for such threats to the EU’s ability to innovate and foster growth;

The core of the problem: understanding China’s military-civil fusion strategy

21. Calls on the Commission to design actions to reduce risks to the EU’s own security and to develop internal resilience by strengthening the security and integrity of its critical infrastructures, supply chains and technology base, notably the 5G and 6G networks, which are all essential for normal EU economic activity and trade; calls on the Commission and the Member States to review their network security toolbox;

1. Underlines that China’s military-civil fusion (MCF) strategy is a state-led, state-directed programme and plan to instrumentalise all levers of state and commercial power to strengthen and support the People’s Liberation Army (PLA), the armed wing of the Chinese Communist Party (CCP);

22. Calls for the Commission, the EU institutions and the Member States to terminate any research funding to Chinese companies that are active in areas of critical and strategic importance to the EU, such as information and communications technology, and to channel the risks related to contracting operators using Chinese equipment;

2. Considers that China’s party-driven political system and economy often require private companies to align their commercial interests with the CCP’s military, repression and political interference activities; highlights that, consequentially, Chinese companies’ international activities help the CCP to expand its influence over foreign countries and undermine geopolitical rivals;

23. Calls on China to put in place and implement a responsible digital governance, with respect for privacy rights, freedom of expression and the rule of law in its digital governance policies, in the framework of World Trade Organization and multilateral standards; calls on the Commission to assess other areas at risk such as semiconductors, quantum computing, blockchains, space, artificial intelligence and biotechnologies, and to consider legislation or tools to provide further protection against malicious software and cyber espionage;

3. Believes that MCF must be understood in a larger political and strategic context, taking into account its interconnections with other initiatives, such as the Belt and Road Initiative (including the Digital Silk Road); believes that the ultimate aim of MCF is to advance China’s long-term strategic goal to become the world’s leading power;

24. Calls on the Commission to share with Parliament, before the end of this parliamentary term, a detailed analysis of the trade risks linked to technologies such as semiconductors, quantum computing, blockchains, space, artificial intelligence and biotechnologies and the possible need for EU action in these fields.

Consequences of the PRC’s civil-military strategy

INFORMATION ON ADOPTION IN COMMITTEE ASKED FOR OPINION

4. Warns of the risk of Chinese companies having any involvement with EU strategic assets, especially those companies that have direct or indirect links to China’s military system; underlines, in this regard, its concern that technology and technological expertise will be transferred to China’s military, increasing the PLA’s ability to develop the next generation of military technology, which may be used to coerce partners in Asia and around the world;

Date adopted

5. Emphasises that China produces 70 % of the world’s batteries (hosting three of the top five battery manufacturing giants), accounts for 60 % of global aluminium production and 75 % of silicon production, is the leading refiner of 60 % of lithium and 70 % of copper processing and produces 84 % of the world’s nickel and 85 % of its cobalt; underlines that Chinese mining companies are active in the Democratic Republic of Congo (cobalt), Indonesia (nickel) and Chile and Australia (lithium) and that its quasi-monopoly on the production and processing of these critical commodities presents not only an acute geopolitical challenge for the EU, but also a huge risk for Europe’s defence and other industrial sectors;

24.10.2023

6. Recalls that both diplomatic and military communication travels through privately owned undersea cables provided by Chinese companies, such as HMN Technologies, a PLA cyber intelligence–affiliated entity; expresses its grave concern over the undersea data cable systems operated by Chinese company HMN Technologies, which connect EU Member States’ territories and the Indo-Pacific region, including Member State and NATO military bases in the region, creating security vulnerabilities as regards underwater surveillance and the collection of intelligence;

Result of final vote

Developing responses: expanding the toolkit to respond to security and defence concerns

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7. Warns that the deterioration in the security environment in Europe and around the globe requires urgent reflection on how to strengthen the EU’s strategic autonomy and reduce its dependencies on countries like the PRC that are systemic rivals, not strategic partners; stresses the need to prevent sensitive emerging technologies and key dual-use items from being leaked to destinations of concern that pursue or collaborate in MCF strategies;

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8. Remains concerned that European critical infrastructure is becoming increasingly vulnerable to external influence; commends, in this respect, recent legislative steps to enhance the resilience of critical entities in the EU; notes with concern, however, that such initiatives are largely limited to screening procedures for foreign direct investment, leaving other channels open for the CCP to gain access and influence over critical assets;

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9. Notes that the screening of stakeholders with access to critical infrastructure cannot be limited to direct investment; calls for the current instruments that address foreign direct investment and foreign subsidies to be expanded to include generalised screening procedures for all stakeholders involved in EU critical infrastructure projects; calls on the Commission, with the support of the Member States, to map, track and assess China’s access to critical infrastructure in the EU; stresses that the Member States are ultimately responsible for infrastructure protection, but have not consistently implemented current guidelines on foreign direct investment or set up national-level investment-screening mechanisms;

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10. Welcomes the potential of the Commission’s proposal for a European economic security strategy to expand the EU toolkit to exports or outward investments in a narrow set of key enabling technologies with military applications, inter alia, in the areas of quantum computing, advanced semiconductors and artificial intelligence; calls for the swift adoption of the Commission’s proposals and for the Member States to fully implement the EU’s expanded regulatory framework to exclude entities that could contribute to MCF;

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11. Further welcomes the Commission’s proposal to prevent the leakage of sensitive emerging technologies by establishing a list of dual-use technologies, based on narrowly defined and forward-looking criteria, such as the potential enabling and transformative nature of a technology, the risk of MCF and the risk of the technology being misused to violate human rights; calls on the Commission and the Member States to identify and implement the relevant protection measures for these dual-use technologies as soon as possible;

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12. Welcomes the adoption of the European Chips Act, which will increase the EU’s ability to produce semiconductors and create a strategic map of, inter alia, capability gaps in the semiconductor value chain in the EU, thereby limiting the EU’s dependence on third countries such as China; calls for further proposals to secure the production and supply chains of critical infrastructure and material within the EU;

Members present for the final vote

13. Calls on the Commission to propose a new legislative framework to mitigate the security risks coming from the suppliers of undersea cable systems; stresses the need to prevent cable system suppliers, such as Chinese companies, from sharing data with intelligence services other than to protect the infrastructure from outside intrusions or malignant attacks;

Anna-Michelle Asimakopoulou, Saskia Bricmont, Jordi Cañas, Raphaël Glucksmann, Danuta Maria Hübner, Miapetra Kumpula-Natri, Danilo Oscar Lancini, Bernd Lange, Margarida Marques, Sara Matthieu, Helmut Scholz, Joachim Schuster, Sven Simon, Kathleen Van Brempt, Marie-Pierre Vedrenne, Jörgen Warborn, Iuliu Winkler, Jan Zahradil, Juan Ignacio Zoido Álvarez

Internal-external nexus: strengthening the resilience of the EU’s closest partners

Substitutes present for the final vote

14. Is cognisant of the PRC’s penetration of the EU market and its wider neighbourhood; calls on the Commission and the European External Action Service (EEAS) to ensure that the measures taken to strengthen the resilience of the EU in the face of Chinese influence are also extended to the EU’s closest partners, in particular accession countries and those part of the EUs neighbourhood policy;

Reinhard Bütikofer, Marco Campomenosi, José Manuel García-Margallo y Marfil, Svenja Hahn, Seán Kelly, Javier Moreno Sánchez, Urmas Paet, Pedro Silva Pereira

15. Recalls that the PRC’s naval forces have legal tools to ensure that China’s civilian ships and infrastructure can be used for military and security purposes; considers that China can use its civilian commercial infrastructure to support the PLA’s presence in third countries; warns that such MCF provides the PLA with access to foreign ports, enabling it to pre-position logistics support to sustain naval deployments as far afield as the Indian Ocean, the Mediterranean Sea and the Atlantic Ocean; underlines that the risks of espionage are highest when Chinese civilian commercial assets are located in logistical hubs close to EU and NATO naval bases or port operators that have signed agreements to provide logistical support to European companies;

Substitutes under Rule 209(7) present for the final vote

16. Notes that one third of all African infrastructure built since 2010 has been financed and constructed by Chinese state-owned enterprises; underlines that, over the past 20 years, China has increased its trade, investment and loan commitments with few or opaque contractual obligations; expresses concern that this Chinese model is clearly attractive to many countries that cannot satisfy EU requirements for accessing equivalent levels of finance, thereby expanding Chinese influence to the detriment of EU partnerships; calls on the Commission and the EEAS to ensure that the EU’s high standards for investment with partners do not compromise it security relationships and engagement as a reliable and strategic partner;

Dacian Cioloş

17. Underlines with concern the PRC’s strategy to build a ‘blue economy cooperation base’ along the coast of Africa, including through the construction of fishing vessels and vessel repairs facilities, which can also be used for military purposes; stresses that there is a general lack of detail and transparency on these agreements and licences with African countries; outlines the potential geopolitical consequences for the EU, especially in third countries where the EU is engaged;

FINAL VOTE BY ROLL CALL IN COMMITTEE ASKED FOR OPINION

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18. Instructs its President to forward this resolution to the Vice-President of the Commission / High Representative of the Union for Foreign Affairs and Security Policy, the Council and the Commission.