The EU’s secret weapon to shut out Chinese companies

BRUSSELS — The EU executive wants to cut Chinese firms out of lucrative EU public contracts at home and abroad by overhauling its budget rules, according to three European Commission officials.

In March, the Commission will lay out new instructions to impose additional security requirements on foreign companies bidding for public contracts, targeting Chinese firms in particular.

In the face of heightened geopolitical and trade tensions with the U.S. and China, Brussels is exploring measures that favor European businesses over foreign competitors. The rules would apply to its current and future €1.8 trillion long-term budget, which begins in 2028.

The EU crackdown is part of a wider effort to limit Chinese influence in Europe. A parallel bill from Industry Commissioner Stéphane Séjourné aims to curb Chinese investment and force foreign companies to partner with local firms in a bid to revive the EU’s industrial sectors.

Shunning foreign entities would dovetail with France’s push to extend a “Buy European” clause across the whole EU budget, which is currently being negotiated by national capitals.

“You have to be able to take into account the fact that, at least in some sectors that are strategic, parts or products are made in Europe,” Finance Minister Roland Lescure told reporters on Monday. “The U.S. are doing it, China are doing it … We cannot be just the last baby in the yard that’s running around when everybody’s doing something else in the drawing room.”

But critics warn that attaching too many strings to EU spending could raise costs and ignite trade retaliation, while penalizing poorer countries that receive the bloc’s development funds.

A group of European commissioners focusing on economic security — including Piotr Serafin, Valdis Dombrovkis and Maroš Šefčovič, who are respectively responsible for the budget, economy and trade portfolios — will discuss the budget rules on Feb. 18.

“There needs to be a link between our strategic priorities and the way we spend our money,” said one of the Commission officials, who were granted anonymity as they are not authorized to speak publicly.

EU strings attached

The crackdown stems from a clause that the Commission introduced in the budget rules in 2024 that set out “security requirements” for certain EU public contracts that involve strategic assets.

The Commission will outline what those requirements are and which sectors they’ll affect next month. The guidelines could, for example, go as far as restricting Chinese firms from producing inverters used in solar panels, one of the officials said. The rules will also apply to projects undertaken by the European Investment Bank, the bloc’s lending arm. Brussels will stop short of singling out the countries that’ll be cut off from EU public money, however.

Under the new budget in 2028, the overhaul could narrow the access of foreign companies to the European Competitiveness Fund — a €410 billion cash pot to promote industrial development — and the Global Europe Fund, which is worth €200 billion and finances EU aid to developing countries.

The crackdown stems from a clause that the European Commission introduced in the budget rules in 2024. | Nicolas Economou/NurPhoto via Getty Images

The French may welcome the looming crackdown, as Paris pushes for a “European preference” across the whole budget. But the Commission’s pitch will meet resistance from a group of Northern European countries.

In a joint letter, Estonia, Finland, Latvia, Lithuania, the Netherlands and Sweden warned that prioritizing European goods and services “risks wiping out our simplification efforts, hindering companies’ access to world-leading technology … and pushing investments away from the EU.”

Joshua Berlinger contributed reporting from Paris.