China’s booming export machine is once again at the center of a deepening rift with Europe, as European officials sound the alarm over what they see as an unsustainable trade imbalance and a mounting threat to the continent’s industrial base. French President Emmanuel Macron, never one to mince words, called the trade gap with China “unbearable,” warning that it has become “a question of life or death for European industry,” according to Bloomberg. His remarks echo a growing sense of urgency among European leaders, who are scrambling to defend the region’s economic security in the face of China’s relentless rise.
On December 11, 2025, Reuters reported that the European Union reached a provisional agreement on sweeping new rules to screen foreign investment in sensitive sectors. The move, which comes amid escalating trade tensions, is aimed squarely at curbing risks posed by investments from countries like China—though no nation is named explicitly in the initial proposal. The bloc’s leaders have made no secret of their concerns, however, with European Commission President Ursula von der Leyen stating that the EU’s relationship with China has “reached an inflection point.”
The new regulations, which still require formal approval by both the European Parliament and the Council of EU governments, will require all member states to scrutinize and, if necessary, block foreign investments in strategic areas such as defense, artificial intelligence, critical minerals, and digital infrastructure. The rules go further than previous frameworks, extending screening requirements to investments within the EU if the investor is ultimately controlled by a foreign company.
At the heart of these measures is a policy dubbed “de-risking”—the bloc’s strategy for reducing its economic dependence on China. The policy has gained momentum as Beijing has tightened its grip on exports of rare earths and semiconductors, both essential for modern industries. The new rules contrast “reliable partners” with “countries of concern,” a clear signal of where the EU’s anxieties lie. It’s not hard to read between the lines: China’s dominance in these sectors is now seen as a potential lever for political and economic pressure.
“Today’s agreement strengthens the EU’s capacity to protect its security and public order, while ensuring Europe remains an attractive destination for investors,” Danish Business and Industry Minister Morten Bodskov said in a statement, as reported by Reuters. Denmark currently holds the rotating EU presidency, and Bodskov’s comments reflect a delicate balancing act—welcoming investment, but not at the expense of European sovereignty or security.
The revised regulations are sweeping in scope. Member states will be required to screen investments in military and dual-use equipment, “hyper-critical” technologies such as AI, quantum computing, and semiconductors, as well as critical raw materials and energy infrastructure. The rules also encompass vital digital infrastructure, including transport and voter systems, databases, and systemically important financial institutions such as central counterparties and payment systems. The European Commission will have the authority to issue opinions on specific screening decisions, but the ultimate responsibility remains with the member state where the investment is taking place.
For European industry, these changes come not a moment too soon. Macron’s stark assessment—“a question of life or death”—reflects fears that unchecked Chinese competition could hollow out the continent’s manufacturing base, leaving it vulnerable in a world where economic security is increasingly intertwined with national security. According to Bloomberg, Macron’s frustration is widely shared in European capitals, where leaders worry that China’s state-backed firms enjoy unfair advantages and that critical European industries could be lost for good if action isn’t taken.
Von der Leyen’s warning that ties have “reached an inflection point” underscores the sense that the old rules of engagement no longer apply. The EU, long a champion of open markets, is now grappling with the need to defend its own interests in a world where economic competition is often a proxy for geopolitical rivalry. The new investment screening framework is just the latest sign of this shift, as the bloc seeks to assert greater control over its economic destiny.
While the regulations do not single out China by name, the subtext is clear. The proposal draws a sharp line between “reliable partners” and “countries of concern,” and highlights the risks of excessive reliance on a single supplier or market. China’s decision to curb exports of key materials like rare earths and chips has only heightened these anxieties, serving as a wake-up call for European policymakers.
The agreement follows months of negotiations between the European Parliament and the Council, reflecting the complexity of balancing security concerns with the desire to remain open to investment. Under the new rules, screening decisions will be made at the national level, but with greater coordination and oversight from Brussels. The European Commission’s ability to issue opinions—while not binding—adds an extra layer of scrutiny, ensuring that member states consider the broader implications of foreign investments.
The move comes against a backdrop of growing cyber threats as well. On December 12, 2025, the French Interior Ministry revealed that its email servers had been targeted in a cyber attack, according to Reuters. Interior Minister Laurent Nunez confirmed that an investigation was underway, though details remain scarce. The incident serves as a reminder that economic security and cybersecurity are now inextricably linked—and that the stakes have never been higher.
For businesses and investors, the new framework introduces a new level of complexity. Companies looking to invest in Europe’s most sensitive sectors will face heightened scrutiny, with the risk that deals could be blocked if deemed a threat to security or public order. At the same time, the EU is keen to project itself as an attractive destination for investment, mindful that excessive red tape could deter the very capital it seeks to attract.
It’s a tricky balancing act, and one that will require careful management in the months ahead. The provisional agreement must still be formally approved by both the European Parliament and the Council, but its passage seems likely given the political consensus around the need for stronger safeguards. As the EU charts a new course in its relationship with China, the world will be watching to see how it navigates the competing demands of openness and security.
For now, one thing is clear: Europe is no longer willing to accept the status quo. With China’s exports surging and strategic sectors increasingly exposed, the bloc is moving to assert greater control over its economic future. Whether these measures will be enough to level the playing field—and protect Europe’s industrial heartland—remains to be seen. But as Macron put it, the stakes could hardly be higher.
