Illustration: Xia Qing/GT

In a non-binding recommendation published on Wednesday,MKsports the European Commission requested the 27 EU members to conduct a 15-month risk assessment of outbound investments in semiconductors, artificial intelligence (AI) and quantum technologies, as reported by Reuters. This recommendation, it is said, could lead to measures to "protect EU economic security." However, beneath this ostensibly cautious approach lies the potential for unintended consequences. Far from bolstering the EU's economic security and resilience, such actions could, in reality, undermine it.

In this recommendation, the European Commission did not mention China, but Reuters, along with some other media outlets, was eager to bring up China in its coverage of the news. Reuters wrote in its report that "the EU set out plans a year ago to bolster economic security through closer scrutiny of foreign investments and more coordinated controls on exports and outflows of technology to rivals such as China."

In January 2024, the European Commission adopted five initiatives to strengthen the EU's economic security, one of which included consulting member states and stakeholders to identify potential risks stemming from outbound investments in a narrow set of technologies. Notably, the European Commission did not mention China at the time, but some media outlets nonetheless drew connections, hinting at the country's involvement.

In recent years, China has made remarkable progress in several high-tech fields, including semiconductors, AI and quantum technologies, propelled by a strengthened commitment to independent innovation. Therefore, regardless of whether the EU conducts a risk assessment of outbound investments, the focus should not be on their potential impact on China. The country's high-tech industries will continue to thrive, sustained by their own innovation. The true concern, instead, lies in the potential consequences for the EU itself.

It is undeniable that the current climate of uncertainty is impeding both the global economic recovery and the growth of high-tech industries. In confronting this turbulence, if the EU seeks to bolster its economic security, it needs to first identify the risks that are constraining the development of its technological competitiveness. A crucial factor here is not China's technological progress, but rather the economic policies of Washington, which are disrupting the global technology supply chain, fostering zero-sum competition in technology, and potentially inflicting varying degrees of harm on economies, including that of the EU.

For instance, the US government announced on Monday that it would further restrict AI chip and technology exports, as reported by Reuters. While about 18 countries will essentially be exempt from the rules, some EU member states are notably excluded. European Commission officials on Monday expressed concern over new US measures restricting access to advanced AI chip exports to select EU member states and their companies, according to the Xinhua News Agency.

In the current global landscape, if the EU aims to protect its economic security, a sensible strategy would be to bolster its own economic resilience and technological capabilities. However, instituting a risk assessment for outbound investments would not only undermine this objective but also impede the competitiveness of EU enterprises and stifle technological advancement. It would be like tying its own hands and feet, curbing its growth and limiting its potential. In the high-tech sector, if the EU seeks to strengthen its technological competitiveness, a crucial challenge lies in fostering an environment where technology companies are encouraged to invest more freely abroad, forge international partnerships and tap into greater opportunities for profit in global markets.

In July 2024, Semiconductor Equipment and Materials International (SEMI) strongly encouraged all policymakers involved to carefully consider key recommendations including ensuring that European semiconductor companies are as free as possible in their investment decisions to avoid losing their agility and relevance across global markets. 

The recommendations emphasized the need for the European Commission to adopt a positive approach to economic security that recognizes the crucial role of cross-border investments for the functioning and prosperity of the European semiconductor industry, in order to guarantee its companies have a high level of agility and market access at the global level.

The same principle applies in other high-tech fields, such as AI. It is essential to fully acknowledge the risks inherent in the assessment of outbound investments, particularly with regard to the potential harm they could inflict on European tech companies and the broader European economy.