While Chinese equity investments in the EU-28 have dropped, non-equity types of activity have grown rapidly recently. Joint R&D is an increasingly important dimension of China’s economic engagement with many OECD economies, and a natural next step for technology collaboration. Recently, there has been an expansion in R&D collaborations between Chinese firms and European entities.
These interactions can bring substantial benefits to the European actors involved, as they allow for the collaborative creation of technologies and know-how, new products and services. The Covid-19 outbreak has also illustrated the importance of cross-border R&D collaboration for tackling global challenges like pandemics and climate change.
At the same time, R&D partnerships often provide Chinese parties with access to potentially sensitive European assets, sometimes without European counterparts even noticing. In 2018, the EU began revising its foreign acquisitions review toolbox, in large part due to concerns around security risks from Chinese investment (see our last joint report).6 These efforts have so far focused on FDI and other equity investments, while R&D collaborations still largely escape regulatory scrutiny and have received comparatively scant attention.
This Special Topic section analyzes the current trends in Sino-European R&D partnerships. While recognizing the many benefits to Europe, it also presents examples of collaborations that raise concerns due to security and human rights risks. It concludes by highlighting implications for businesses and policymakers.7
2.1 Trends and types of R&D collaborations
China’s maturing economy has naturally proliferated the channels of interaction between Chinese firms and European entities. Cross-border R&D collaborations are a common and growing feature of international technology flows.8This report does not aim to provide a comprehensive picture of growing R&D ties between Europe and China. Instead, it focuses on R&D activities involving Chinese firms in Europe and presents anecdotal evidence of their growth – and of some of the concerns they raise. The report covers three main types of R&D interactions between Chinese firms and European stakeholders:
- R&D collaborations between Chinese and European companies. These arrangements are widespread and serve as a key channel for private cross-border technological exchanges
- Partnerships between Chinese firms and European universities and other academic institutions, which have grown rapidly in recent years
- Chinese firms’ involvement in projects supported by or involving European governments and EU institutions. The EU and China have strong, longstanding research and innovation (R&I) ties, which are most visible in Chinese corporate involvement in Horizon 2020, the EU´s flagship research funding scheme.9
Other highly relevant forms of R&D collaboration are not covered in this report. They include partnerships between Chinese and EU governmental entities10 or academic institutions,11 or between European firms and non-corporate Chinese institutions. Grants and fellowships involving individual researchers are also omitted, though they are an important regulatory blind spot. And in addition to EU-based collaborations, R&D tie-ups are also multiplying in China. For example, several member states have signed innovation agreements with China’s government, ranging from informal pledges to formal partnerships. Many European companies have also been expanding their R&D activities in China. Though not reviwed in this report, all these types of transactions feature prominently in the diversifying picture of EU-China technology exchanges.12
2.2 Balancing benefits and risks: Why Europe needs a more clear-eyed view of research collaboration with China
The importance of cross-border collaboration in critical scientific fields such as health research is amply demonstrated by the deal struck between the German biotech firm BioNTech and Shanghai Fosun Pharmaceutical to test an experimental Covid-19 vaccine, backed by a USD 135 million investment from the Chinese group.13
More generally, European stakeholders can benefit greatly from R&D partnerships with Chinese firms. In a globalized world, innovation is an increasingly cross-border activity. Despite enduring weaknesses in innovation, China now outspends the EU in R&D expenditure as a share of GDP,14and is home to highly innovative companies, so the case for collaboration a compelling one. Not only is joint R&D critical for EU companies to tailor their products and services to Chinese partners and clients, it is also an opportunity to tap into China´s talent pool and hi-tech industrial clusters.
However, R&D collaborations granting Chinese players access to state-of-the-art European technologies could also have a long-term detrimental impact on European economic competitiveness, in a similar way to Chinese acquisitions of EU strategic tech assets. Many European stakeholders still tend to underestimate the Chinese government´s top-down, strategic approach to foreign R&D collaboration, which is geared towards attracting or leveraging talents and technology from abroad. China’s coordinated plans covering industrial policy and technological autonomy mean that some R&D partnerships are specifically targeting sectors such as emerging technologies where China’s government seeks to create firms that can become global leaders, or to gradually replace foreign technologies with indigenous ones.15
Two other key concerns stand-out, aside from economic and competitiveness considerations. First, some of these partnerships could lead to the transfer of dual-use technologies to China´s military-industrial complex. Second, R&D collaborations can contribute to enhancing the Chinese state’s ability to exert mass control over its population. European actors need to pursue a clear-eyed approach to R&D collaborations with Chinese entities to avoid such risks.
2.3 Security and military considerations
R&D partnerships are not covered by existing European FDI screening regulations or export controls, yet they can lead to the leakage of sensitive technologies and know-how. The potential for transfer of dual-use technologies to China’s industrial-military complex is a key concern.
There are numerous cases of European companies engaging in R&D collaborations with Chinese entities directly owned by or linked to the People´s Liberation Army (PLA), including around sensitive and potentially dual use technologies (see table 1). No member state seems to be immune, and technologies involved range from satellite technologies to critical materials and aerospace.
Many European academic institutions, too, exhibit a lack of awareness about the security implications of some of their R&D tie-ups, coupled with poor due diligence on Chinese partners. Recent reports document how Chinese researchers sponsored by PLA-affiliated universities have tapped European universities for cutting-edge research in defense-relevant areas.16 We find that Chinese firms with ties to the CCP or its military have also ramped up their partnerships with European universities and other academic institutions. Some of these arrangements involve basic research in technologies that could be relevant for the defense applications of new materials, artificial intelligence, or communications technologies.
Even EU government institutions often neglect or ignore the security risks of research collaborations with Chinese counterparts. One early example was China’s participation in the EU’s Galileo satellite system, which allowed the Chinese parties (including some of China’s largest military aerospace manufacturers) to retain ownership of resulting technologies and intellectual property after Beijing left the partnership. China has since built its dual-use satellite navigation system, Beidou, which rivals Galileo and boosts the PLA´s geolocation and communications capabilities.17