EU conducts ‘dawn raid’ on Chinese security equipment supplier

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Brussels has raided the offices of a Chinese security equipment supplier, deploying new anti-foreign subsidy powers in a move that will further inflame tensions between the trading superpowers.

The raid by the European Commission and local law enforcement on the offices in Poland and the Netherlands of Nuctech, which manufactures baggage security scanners, came as Brussels cracks down on what it sees as Beijing’s unfair trading practices.

The raids took place at the Rotterdam and Warsaw offices of Nuctech, a state-owned company once run by the son of former Chinese president Hu Jintao. The company’s products have been banned by some western countries on national security grounds.

“I can confirm [the raids] and of course we are co-operating,” Nuctech Europe said after the Financial Times earlier reported the company was the target of the raid.

“It is all fresh, let’s see what happens. We have given our full co-operation,” it added.

Washington has added Nuctech to the commerce department’s entity list for “its involvement in activities contrary to the national security interests of the US” and warned that “several countries have raised concerns about the security risks posed by Nuctech equipment . . . given the company’s control by the PRC government”.

Nuctech baggage scanners have been installed in European airports including Pisa and Zurich, according to company officials. Members of the European parliament condemned a 2022 decision by Strasbourg airport to purchase Nuctech scanners. The parliament is based in the French city.

The move is the first time Brussels has used its new anti-foreign subsidy rules to justify a raid on a company.

The European Commission declined to comment.

“The sudden unannounced inspection on April 23 undermines the business environment for foreign companies within the EU in the disguise of foreign subsidies,” the Chinese chamber of commerce said, without naming the company.

The raids follow a spate of arrests in Germany of people suspected of spying for China, including three accused of trying to sell sensitive military technology to Beijing.

The EU is China’s second-largest trading partner and one of its most important sources of foreign investment. But tensions have been growing between Beijing and Brussels, with the latter launching several anti-subsidy investigations in recent months.

The bloc has accused China of stoking industrial overcapacity, especially in its electric vehicle and renewable energy sectors, which compete directly with European companies, raising the risk of dumping in EU markets.

The growing friction could complicate a planned trip by Chinese President Xi Jinping to Paris next month when he is expected to meet his French counterpart Emmanuel Macron.

In a statement, the commission said the raids followed “indications that the inspected company may have received foreign subsidies that could distort the internal market”.

“Unannounced inspections are a preliminary investigative step into suspected distortive foreign subsidies,” it said.

The chamber of commerce said enforcement agencies “authorised by the European Commission” had seized IT equipment and mobile phones, scrutinised documents and demanded access to “pertinent data”.

It accused the EU of “weaponising” anti-subsidy investigations to “suppress” Chinese companies and conduct “unjustifiable ‘dawn raids”.

“We call for the provision of a genuinely fair and non-discriminatory business environment for Chinese enterprises,” it said.

The EU on Wednesday said it had also opened an investigation into China’s medical device market on the grounds that European manufacturers were being unfairly blocked from supplying doctors and hospitals.

The commission said Chinese laws, including the “Buy China” policy, were “favouring the procurement of domestic medical devices and services”.

The probe is the first use of a new international procurement instrument. If the EU determines there is discrimination, it can take measures to hinder China’s access to its market.

The EU Chamber of Commerce in China said a lack of fair access to China’s public medical device procurement market had been a problem since Beijing launched import-substitution industrial policies in the sector in 2015.

“The European Chamber supports the end goal of this action, which is to ensure that European companies have the same access to China’s procurement market as Chinese companies enjoy in Europe,” it said.

Wang Wenbin, China’s foreign ministry spokesperson, said on Wednesday in response to both the raid and the investigation: “We urge the European side to uphold its commitment to market openness and fair competition principles, adhere to World Trade Organization rules and stop using various pretexts to unjustifiably suppress and restrict Chinese enterprises.”

The raids and anti-subsidy actions raise the spectre of tit-for-tat retaliation. China has countered western accusations of oversupply by arguing that the US and its allies are trying to suppress and contain its industry. It has opened an anti-dumping investigation into French brandy.

Chinese authorities have also conducted a series of raids on the offices of foreign consultancies over the past year, often without any official explanation or acknowledgment, though these are usually believed to be related to national security.

Additional reporting by Ryan McMorrow in Beijing and Javier Espinoza, Alice Hancock and Laura Dubois in Brussels