European industry is under mounting pressure from China. Industry groups have warned that as many as 300,000 factory jobs could be at risk across the European Union by the end of this year as Chinese competition intensifies and Beijing consolidates its position across key supply chains.
Yet Europe’s debate about Chinese economic influence remains focused largely on the most visible risks: acquisitions by Chinese state-owned enterprises, investments by business figures close to the Chinese Communist Party and direct purchases of strategic infrastructure.
These transactions matter, but they represent only the most obvious form of economic influence.
Chinese capital can also enter Western markets through investment funds, minority stakes and joint ventures. In such cases, the company involved may remain legally independent, commercially legitimate and outwardly European, Korean or American. The connection to China may become visible only after following several layers of ownership and investment.
This does not mean every company with Chinese investors or commercial partners represents a security threat. It does mean that regulators can no longer assess exposure to Beijing simply by asking who formally owns a business.
Influence Without Ownership
The United Kingdom’s decision to remove Huawei equipment from its telecommunications infrastructure demonstrated how governments respond when a Chinese company’s role is clear and politically visible.
More complicated cases arise when Chinese capital is separated from a strategic asset by private-equity structures, limited partnerships or several levels of intermediary companies. Private equity occupies a particularly important space between investment and control. A fund may not directly manage the daily operations of every company in its portfolio, but its financial position can still provide access, influence and the ability to shape major corporate decisions.
The central policy question is therefore no longer limited to whether China owns a strategic company. Policymakers must also consider whether Chinese capital, commercial dependence or investor relationships could affect decisions within industries that appear to have little connection to China on paper. A corporate struggle surrounding South Korea’s Korea Zinc demonstrates the complexity of this problem.
The Battle Over Korea Zinc
Korea Zinc is involved in plans for a multibillion-dollar critical-minerals project in the United States. The proposed joint venture is intended to strengthen supply chains outside a global market in which China possesses enormous processing capacity and influence.
At the same time, Korea Zinc has been embroiled in a battle for corporate control involving its largest shareholder, Young Poong Group, and MBK Partners, a Korean private-equity firm that joined Young Poong in seeking changes to the company’s management.
MBK is not a Chinese company. However, its commercial history in China has attracted scrutiny as the struggle over Korea Zinc has intensified. The private-equity firm has completed major transactions involving Chinese companies, including CAR Inc., eHi Car Services and Apex Logistics. China’s sovereign wealth fund has also reportedly invested in an MBK-managed fund.
None of these facts establishes that Beijing controls MBK or that the firm acts on behalf of the Chinese government. They do, however, raise legitimate questions when MBK is involved in a corporate battle concerning a company central to efforts to reduce dependence on Chinese critical-minerals supply chains.
The sensitivity increased when MBK and Young Poong opposed aspects of the proposed American project, arguing that its structure could place excessive influence in the hands of the US government. They subsequently sought to associate themselves with the project, including through an event in Tennessee presenting their own vision for the investment.
The strategic risk does not depend solely on China obtaining formal control over Korea Zinc. Any delay, disruption or weakening of a project intended to create an alternative to Chinese-dominated supply chains could benefit Beijing indirectly. That remains a risk rather than proof of Chinese interference. But strategic policy is partly about identifying vulnerabilities before control has already changed hands.
Following Chinese Capital Through Europe
Europe faces a similar problem, although the relevant investment structures can be even more difficult to trace.
In one case, China’s State Administration of Foreign Exchange reportedly used a Luxembourg-based holding company, JCSS BlueLight, to invest in a fund connected to the parent company of French infrastructure investor Vauban.
Reaching the Chinese state connection required following the investment through four separate corporate levels. From the outside, the relevant businesses appeared European-owned and European-operated. Yet Chinese state capital was present within the broader investment structure.
The significance is not that every indirect investment produces operational control. It is that conventional ownership checks may fail to reveal important financial relationships surrounding strategic infrastructure. An assessment limited to the name on the company’s front door would miss the wider network of capital behind it.
When Partnership Creates Dependence
A more transparent example involved the China Investment Corporation, Italy’s Investindustrial and UniCredit.
The three organisations established a €600 million cooperation fund aimed at helping medium-sized Italian businesses expand into the Chinese market. Unlike the layered Vauban-related investment, the Chinese participation in this arrangement was openly acknowledged. The strategic advantage lay not in concealment but in access.
By partnering with established European financial institutions, the China Investment Corporation could benefit from their knowledge of regional markets, identify promising companies and create deeper commercial relationships between those businesses and China.
For participating Italian firms, the arrangement offered capital and access to a vast export market. For Beijing, it created another channel through which Chinese finance could become embedded in European industry. Such cooperation is not inherently illegitimate. European companies have strong commercial reasons to seek investment and access to Chinese consumers.
The risk emerges when access to capital or markets gradually becomes dependence, and when that dependence begins affecting commercial or political decisions.
Europe Must Look Beyond the Buyer
The cases of Korea Zinc, JCSS BlueLight and the Investindustrial partnership are structurally different.
One concerns a corporate battle around a strategically important minerals producer. Another involves Chinese state capital passing through several layers of European investment structures. The third is an openly declared partnership designed to connect Italian companies with the Chinese market.
What links them is that China’s potential influence becomes less obvious once policymakers move beyond direct ownership. This is the weakness in much of Europe’s current approach to economic security. Investment screening is often designed to identify a visible foreign buyer attempting to acquire a sensitive asset. It is less effective when exposure develops through funds, minority positions, joint ventures or commercial dependence.
Europe should not treat every Chinese investment as hostile. Doing so would damage legitimate business activity and reduce access to valuable capital. But the EU must develop a clearer picture of who ultimately supplies capital to major investment funds, what rights accompany that investment and whether commercial relationships create leverage over strategic decisions.
Screening should consider the complete financial network surrounding critical infrastructure, advanced manufacturing, energy, telecommunications and supply chains, not merely the identity of the immediate purchaser.
The issue is especially urgent as Europe attempts to reduce its dependence on China while simultaneously losing industrial capacity and jobs to Chinese competition. Where policymakers fail to look today may become the point at which Beijing gains leverage tomorrow. In the immediate term, that could affect investment decisions, factory closures and employment. Over the longer term, it could reshape the competitive environment itself, leaving European companies operating on a playing field increasingly tilted towards Beijing.
