Accompanied by their national colleagues, European Commission inspectors gained access on Tuesday to documents, computer systems and telephones of Nuctech staff in the Polish capital Warsaw, where Nuctech has a factory, and the Nuctech branch in the port of Rotterdam. A spokesperson for the Chinese customs scanner champion says the company is fully cooperating with the investigation.
According to the European Commission, this concerns a preliminary investigation into possible “disruptive foreign state aid”. It has not yet been established that Nuctech has actually received unwanted Chinese state aid. In 2010, Brussels already imposed additional levies on Nuctech due to the low prices with which the Chinese company is pricing other providers out of the market.
Although the latest investigation into Nuctech officially focuses only on state subsidies, the company is also controversial due to concerns about the security of the enormous amount of information collected through Nuctech equipment. Under far-reaching national security legislation, Chinese companies are obliged to share their data with the Chinese state. That is why the United States, Canada and Lithuania have been banning these Chinese scanning equipment for some time.
Despite persistent warnings from cyber experts, intelligence services and the US government, Nuctech supplies scanners to ports, airports and distribution centers in almost all EU member states. In 2022, the tide turned for Nuctech when MEPs rebelled against the proposed purchase of Nuctech scanners by Strasbourg airport, where the European Parliament sits.
Safety risk
The ownership structure of Nuctech, founded in 1997 by professors from the leading Tsinghua University in the capital Beijing, is complicated. The listed company is 75 percent owned by Tsinghua Tongfang. Since 2019, that company Tongfang has been more than twenty percent owned by China National Nuclear Cooperation (CNNC). This state-owned company CNNC is engaged in the development of nuclear technology for both civilian and military use. Its executives are appointed by the Chinese cabinet.
Due to the entanglement of Nuctech owners with the Chinese army and the Communist Party – the son of former party leader Hu JIntao was head of Nuctech for a time – the US government banned the use of this equipment at US airports in 2014. Since 2020, the company has been blacklisted in the US as a national security risk.
Now Brussels is also taking action against Nuctech in an unprecedented way in Europe. For years, the EU has been fighting in Beijing for greater access for European companies in China. Chinese companies are welcome in the EU, while their European competitors are excluded from the Chinese market. Now Brussels is prepared to take tougher measures. Since the rules against foreign subsidies were introduced in July 2023, the European Commission has investigated Chinese companies four times, but as far as we know no raids have ever occurred.
Last year, Chinese authorities raided a number of Western consultancy companies. Beijing has also targeted Western countries with the help of export restrictions on earth metals, probably in retaliation for the refusal of, for example, the Netherlands and Japan to supply China with advanced machines for chip production.
Notable arrests
Growing friction over trade and national security between Brussels and Beijing sets the tone for an important visit by Chinese leader Xi Jinping to France, Serbia and Hungary, expected to take place in early May. Earlier this week, a number of notable arrests also took place in Germany and the United Kingdom of Germans, Britons and a Chinese suspected of espionage.
The fact that the EU is taking a harder line is also evident from an investigation announced on Wednesday into alleged unfair practices with which European producers of medical goods are excluded from the Chinese market. The EU has been complaining about this since 2015.
A spokesperson for China’s Commerce Ministry on Wednesday condemned the raids on Nuctech as “undermining the confidence of all foreign companies in their European operations.” The Chinese government said in response that it would “take all necessary measures to safeguard the rights of its companies.” Beijing previously hinted at the possibility of identifying French cognac as one of the products that European companies dump on the Chinese market.
This battle could end in the same eye for an eye, tooth for a tooth approach that characterizes the drawn-out trade war launched against China under former American President Donald Trump. The trade dispute has turned into a broader rivalry between the superpowers.
