• The EU is weighing a policy that would require Chinese EV and battery manufacturers to transfer technology in exchange for market access.
  • The move comes amid ongoing investigations into alleged unfair subsidies for Chinese plants in the EU and concerns over industrial overcapacity.
  • This represents a significant escalation in the EU's trade strategy toward China, potentially deterring future investment and triggering retaliation.

EU trade chief Maros Sefcovic announced that Brussels is considering making technology transfer a condition for new Chinese investments, particularly in the electric vehicle and battery sectors, according to people familiar with the matter. The proposal marks a fundamental shift in the bloc's approach to Chinese investment as it seeks to address competitive imbalances.

The policy consideration comes ahead of Sefcovic's visit to Beijing to discuss trade tensions and coincides with ongoing EU investigations into alleged unfair subsidies for Chinese EV plants operating within the bloc. One focus of these investigations is BYD's recently established factory in Hungary, which has drawn scrutiny over its financial ties to Beijing.

"What we're seeing is a recalibration of the EU's entire trade relationship with China," said a European trade official who requested anonymity because the discussions are private. "The playing field has been tilted for too long, and this represents one potential corrective measure."

The move responds to growing concerns within European industrial circles about Chinese industrial overcapacity and the redirection of subsidized goods to European markets following recent American tariffs. EU officials have noted increased imports of Chinese products that may have been diverted from the US market.

Technology transfer requirements would mirror longstanding Chinese practices that have been a major trade grievance for Western companies operating in China. The EU has previously taken China to the World Trade Organization over forced technology transfers, arguing they violate global fair trade rules.

Industry reactions have been mixed. European automotive suppliers have largely welcomed the potential measures as necessary protection for the continent's strategic industries. However, some member states and business leaders have expressed concern about rising protectionism and its potential impact on foreign direct investment flows.

BYD and other Chinese EV manufacturers did not immediately respond to requests for comment on the potential policy shift. The Chinese Chamber of Commerce to the EU declined to comment specifically on the proposal but reiterated its commitment to "mutually beneficial investment relationships."

If implemented, the technology transfer requirement could significantly alter the investment landscape for Chinese companies seeking to establish manufacturing footholds in Europe. Some analysts suggest it might delay or redirect planned investments while negotiations between Brussels and Beijing continue.

The EU is simultaneously deploying a new customs surveillance regime to track import surges of Chinese goods and has escalated a WTO case against China regarding global royalty rates that European officials argue disadvantage EU interests.

Correction: An earlier version of this article misstated the scope of the proposed policy. It specifically targets new investments in the EV and battery sectors, not all Chinese investment in the EU.