Cyber Clashes and Tech Ambitions: Europe Responds
From cyber tensions with China to new tech funding and faltering business ties, Europe grapples with security and competitiveness on multiple fronts.
Dear Readers of Eurasia Dispatch,
Welcome to the latest issue of the newsletter! The Eurasia front has been busy since the previous edition. The media covered news and updates about the Shangri-La Dialogue, a cyberattack-related spat between Czechia and China, as well as the EU’s latest plan to boost its technology industry.
Without further ado, let’s get down to business! This week, Eurasia Dispatch covers the following:
Institutions
Member States
Business
Commentary
INSTITUTIONS
China under fire at the Shangri-La Dialogue
The Shangri-La Dialogue is an annual conference on Asian security issues, broadly acknowledged as Asia’s top defence summit. This year’s meeting took place last weekend, and participants included French President Emmanuel Macron, EU High Representative for Foreign Affairs Kaja Kallas, U.S. Secretary of Defence Pete Hegseth, and Rear Admiral Hu Gangfeng from China.
China was mentioned in many of the speeches. Pointing to North Korean soldiers fighting with Russian soldiers in Ukraine, Kallas stated that the world should be deeply concerned about the China-Russia relationship and its impact on the global security order. Macron argued that unrestrained Russian hostility in Ukraine could pave the way for aggression in Asia, referring to the Taiwan Strait. Hegseth asserted that China is a threat to the security order in the Indo-Pacific and called on Washington’s allies to increase their defence spending.
China rejected accusations at the summit and said that it strives to maintain maritime security order in Asia. China’s embassy in Singapore stated that the Taiwan question and the Ukraine issue are not comparable and charged Macron with using double standards.
The Eurasia Dispatch Take: Based on the tenets of the 2019 EU-China strategic outlook, Brussels treats China as a partner, competitor, and rival. China does not like this framing and emphasises the partnership between the two sides. European officials’ statements at the Shangri-La Dialogue, however, aptly demonstrate that in security matters, the two sides do not see eye-to-eye. As China doubles down on its close relations with Russia, Brussels and Beijing seem to be at an impasse. The upcoming EU-China summit between the two sides’ top leaders in July might reveal if the rivalry is spilling over from security into other areas.
Emerging EU tech fund aims to boost scale-ups
Last week, the EU kicked off ‘The EU Startup and Scaleup Strategy,’ to facilitate the establishment and growth of technology startups in strategic areas, such as artificial intelligence, biotech, and advanced semiconductors, in the pursuit of strategic autonomy. The measures taken in this direction fall under five pillars, which include streamlined regulation, more financing, and talent support. For instance, Brussels plans to set up a ‘Scaleup Europe Fund’ in 2026, which will reportedly mobilise at least €10 billion to purchase equity in strategic sectors.
The Eurasia Dispatch Take: The EU has a lot to make up for in the tech space. A recent Bruegel report pointed out that the bloc is lagging behind the U.S. and China in innovation in critical technologies. The U.S. boasts the Magnificent Seven tech companies, like Amazon and Microsoft, while the EU gives home to less prominent names like ASML, Nokia, or Infineon Technologies. According to Hurun’s Global Unicorn Index 2024, the U.S. had 703 Unicorns—start-ups founded after 2000, valued at $1 billion (~€876 million) and not publicly listed—while China had 340, and the EU had 109. €10 billion will hardly fill this gap, but it is a step in the right direction.
MEMBER STATES
Czech government accuses China of cyberattacks
On 28 May, the Czech government claimed that the Advanced Persistent Threat 31 (APT31)—a Chinese cyber espionage group—hacked Czechia’s foreign ministry and gained access to thousands of unclassified emails between embassies and EU institutions. According to the U.S. Department of Justice, APT31 is sponsored by China’s Ministry of State Security and is based in Wuhan. The group was accused of significant hacks in the past. The U.S. and UK sanctioned two people and one company tied to it in 2024, for targeting U.S. critical infrastructure and the UK’s democratic institutions and parliamentarians.
The Eurasia Dispatch Take: There is no love lost between Prague and Beijing in the wake of this incident. Bilateral ties have been strained for years, as Czech officials often have exchanges with Taiwan, angering Beijing. This hacking incident, however, goes beyond the bilateral nexus to involve other parties. The EU’s High Representative Kaja Kallas expressed support for Prague and said that the EU could ‘impose costs’ on Beijing to retaliate. NATO also showed solidarity with Czechia and committed to the improvement of cyber capabilities against such attacks. Beijing conveyed ‘strong dissatisfaction, firm opposition’ against the accusations.
BUSINESS
China’s rare earth export controls’ ripple effect in Europe
On 28 May, the European Chamber of Commerce in China told its members and reporters that China’s rare earth export controls—which were announced in early April and involve seven rare-earth elements and magnets—could bring European production of related products to a screeching halt within a week. China’s export control measures mean that the impacted rare earth elements and magnets can only be transported to Europe if the involved parties secure licenses first. However, there is a substantial backlog of license applications that has not been processed by the authorities yet, which creates a bottleneck in European production.
The Eurasia Dispatch Take: This issue was reportedly discussed at a semiconductor industry meeting on 27 May. The participants of this meeting ‘included officials from central government departments, representatives from the China Semiconductor Industry Association, the European Union Chamber of Commerce in China, as well as over 40 semiconductor enterprises from both sides.’ According to a China Daily report—which was subsequently removed from the internet—the participants discussed export licensing procedures, a move that could signal ‘easing of rare earth export controls to EU-involved semiconductor supply chains.’ The removal of the report casts a shadow on this interpretation, but China’s recent emphasis on semiconductor technology cooperation with the Netherlands gives it some support.
EU businesses in China are gloomier than ever
Last week, the EU Chamber of Commerce in China released the results of its Business Confidence Survey 2025. Only 29 per cent of the surveyed 503 companies said that they were optimistic about their near-term growth prospects in China. The respondents also noted that China’s economic slowdown is a bigger challenge for them than the uncertainty stemming from the U.S.-China trade war. Despite the challenges, EU companies are keen on staying involved with the Chinese market: they are procuring an increasing number of product components from China because they are cheap.
The Eurasia Dispatch Take: The annual survey results came out shortly after a previous study done by the European Chamber of Commerce in China. That was a flash survey, including 162 respondents, focusing on the effect of the US-China tariff conflict. Just like the annual survey, the flash study also pointed out that tariff measures create uncertainty, but European businesses remain committed to the Chinese market. Jens Eskelund, president of the European Chamber of Commerce in China, said that the EU will probably have the same number of firms in China five years later than it has today. The survey responses and Eskelund’s comments imply that there is no expectation of increased EU business engagement with China in the years to come. To change this outlook, EU and Chinese leaders would have to make breakthroughs on friction points, such as trade probes and import tariffs at their upcoming summit in July.
Shein’s European woes continue
Last week, Michael McGrath, EU Commissioner for Democracy, Justice, the Rule of Law and Consumer Protection, said that Shein, a popular Chinese fast fashion company, was found to breach EU law with untrue discounts, pressure selling, and misleading product labels, among other practices. The bloc gave Shein one month to address the findings or face fines from Brussels. The company said it is working with the authorities to demonstrate its legal compliance.
The Eurasia Dispatch Take: Shein is facing regulatory challenges in Europe. The EU recently proposed a flat fee for all parcels entering the bloc from third countries, which will significantly harm the Chinese firm’s cost competitiveness. In addition, France’s lower house of parliament approved a bill in March that would penalise fast fashion companies to counterbalance their harm to the environment, if enacted. Furthermore, the company’s planned public listing on the London Stock Exchange has been stalled, and it faces pressure due to its exposure to Xinjiang, a politically sensitive region in China. Amid these circumstances, the company is now reportedly considering listing on the Hong Kong Stock Exchange instead.
COMMENTARY
Europe’s defence expansion in peril
Elisabeth Braw, a senior fellow at the Atlantic Council and advisor to the technology company Disruptive Industries, wrote in the Financial Times cheap steel harms Europe’s ambitions of bolstering defence. The argument is that cheap, low-quality steel—usually sourced from China—outcompetes European products and puts local firms out of business. The problem is that the companies in danger produce high-quality steel used in military equipment. If the European corporations go bust, so does Europe’s indigenous capacity to support its defence development, leading to massive exposure to external actors. While Europe tried to protect its industry with import duties, foreign steel producers have since bypassed them by setting up manufacturing units in third countries unaffected by the tariffs.
The Eurasia Dispatch Take: The EU strives to protect its steel industry with the Steel and Metals Action Plan published in March 2025. A glance at the document demonstrates that the EU’s challenges go beyond the competition with cheap Chinese steel. For instance, the 25 per cent tariffs imposed on EU steel by the U.S. this March—now planned to be 50 per cent—restrain EU companies’ access to the U.S. market, negatively impacting profit prospects. In addition to trade defence measures like import tariffs, the EU’s approach to industry protection includes other policies, such as investment support and energy provision at affordable prices. Nevertheless, if it wants to safeguard its industrial base, the EU will still have to cut a deal with the U.S. and guard against the inflow of cheap Chinese steel via third countries.
BEFORE YOU GO
Tech funding, Shein’s troubles in the EU, and Asia-Pacific security frictions shaped the Eurasian discourse in the past weeks. Developments on these fronts will reverberate across global politics, trade, and defence. If you are interested in how these processes evolve further, stay tuned for further updates in the next issue of Eurasia Dispatch! Thank you for reading, and we’d love to hear your thoughts—feel free to share your insights and feedback.
Until next time,
Eurasia Dispatch
P.S. As always, I am grateful to my editor.
Disclaimer: I manage this Substack account independently, in my personal capacity. The views expressed are my own and do not represent the views of my affiliated institutions.