The digitalization of the Chinese economy is a topic that has recently assumed a role as a central issue of EU politics as it concerns security, economic rivalry, and technology autonomy. As China strengthens its digital footprint in Europe through infrastructure investments, telecommunications advancements, and artificial intelligence (AI) cooperation, the EU faces a complex challenge: the idea of economic openness on one hand and tensions with sovereignty, privacy, or the role of technology on the other is still going to persist.

Huawei’s role in European 5G development has sparked controversies over security risks and reliance on Chinese technology.

In the last twenty years, China has made a conscious effort to become a global power in the construction of the digital economy especially in Europe through its giants Huawei, ZTE, Alibaba and Tencent among others. Huawei role in the construction of European countries, 5G has caused a significant number of controversies on security risks and reliance on Chinese products. At the same time, growing Chinese acquisitions of European technology companies, data centers and cloud computing services have raised awareness over foreign ownership of strategic information technologies.

The BRI is a global development plan of China which has the Digital Silk Road as one if its aspects; it is used for technological penetration through funding investments in European communication infrastructures and urban technology/ Artificial Intelligence systems. In recent years, Chinese investors have sought digital investments in many European countries, especially in central and eastern Europe, thanks to economic gains. Nonetheless, major states of western Europe such as Germany and France have raised concern on the security threats as well as the future impacts of China’s digital penetration.

Given China’s rising cyberspace power, the EU has shifted to policies to protect the technological independence and shield its digital assets. The European Commission has introduced very strict measures regarding foreign investments especially in name of technological sectors to compromise by extra EU related entities. The EU Member countries were given the FDI Screening Mechanism in 2020, which enables them to reject acquisitions considered a threat to security.

Further, the GDPR has put a lot of limitations on how foreign companies, including the Chinese IT firms, manage personal user data from Europe. This is because the above regulatory framework cranks up the importance of data privacy and security so as to put a check on any entity from non-EU country aces to personal or sensitive information. The EU has also designed the 5G Toolbox, which is a risk-based assessment of the security of the telecommunications networks.

Some of the member countries have barred Huawei from the development of next-generation 5G networks after considering security threats such as spying and espionage. European countries like the UK and Sweden have made strong decisions to exclude Huawei from their 5G markets as a result of tensions arising from the breakup of the political attachment with the EU while Germany has put in strict measure lest it be called security measures to overcome risks.

The EU’s GDPR and FDI Screening Mechanism aim to limit foreign control and protect sensitive data in the digital sector.

The growth of digital China in Europe is not so much a European story but a universal geopolitical one. Washington has tried for years to persuade European partners to reduce the Chinese engagement, especially in the sphere of telecommunications, and has cautioned that Huawei and other Chinese companies should not dominate the essential infrastructure. On the same note, the EU expects to provide decent respect to opinions from its side and does not aim at copying Americanist trends but providing digital self-sufficiency.

The EU’s political elites understand that cooperation with China disruptively impacts the digital economy across seven domains, including AI research, e-commerce, and smart technologies. However, the EU’s strategic autonomy agenda to mitigate reliance on external suppliers of digital technologies and enhance indigenous development of technology.

Another unprecedentedly important issue for the EU policymakers is the following question: how to pursue digital cooperation with China when dealing with the related risks? The EU cannot ignore complains of ownership of intangible assets, hacking, and espionage through technology equipment associated with china firms. Furthermore, it remains an issue of ethics when European leaders want to collaborate with China in AI, bearing in mind their diverging governance systems, including the view on data protection.

The same holds true for the fragmentation of the digital policies within EU and the same creates problem for a unified stand on China. Some of the member states have backed more rigid controls on Chinese technology while others are focused on economic relations and want to lure Chinese digital investments. It therefore makes the implementation of a comprehensive and effective strategy for the EU much more difficult.

Increased digital investments in Europe give rise to new opportunities and new challenges for the EU decision-makers. In this way, digital investment by the Chinese market fosters economic development and delivers technology but poses security issue, data localization, and dependency question. EU political response, therefore, has involved regulation, security checking and strategic policy making to protect the digital environment.

EU nations remain divided, balancing the need for Chinese investments with the risks of espionage and overreliance on Chinese technology.

However, creating an equilibrium needs EU solidarity, enhanced US and EU partnership, and continual commitments to the nation’s own digital advancement. As the digital environment evolves the EU must stay alert and adaptable to China’s multifaceted digital strategies to control the European technological direction.

Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.