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China is restrained by Italy at Pirelli due to concerns about chip technology

Italy has restricted Sinochem, Pirelli’s largest stakeholder, in an effort to prevent the Chinese government from gaining access to strategic chip technology.

According to a statement released by Pirelli on Sunday, the Italian government decided last week to employ its so-called “Golden Power” legislation, which are meant to protect assets of vital value to the country.

Threatening to further inflame tensions between Europe and Beijing, the government move follows similar intervention by Germany and the UK to safeguard their semiconductor technology.

The Netherlands, home to ASML Holding, a significant supplier to the global semiconductor industry, joined a US-led campaign earlier this year to limit China’s access to the most advanced chipmaking technologies.

The move by Italy comes as US Secretary of State Antony Blinken concludes a high-stakes trip to China aimed at mending ties between the world’s two largest economies.

The Chinese government-owned company Sinochem owns 37% of Pirelli and controls 60% of the company’s board of directors.

The Italian government issued a statement on Friday calling Pirelli’s Cyber Tyre, a chip-equipped tyre used to collect vehicle data, “configured as a critical technology of national strategic importance.”

According to the statement, improper use of this technology “can pose significant risks to both the potential transfer of security-related information as well as the confidentiality of user data.”

The ruling places strict restrictions on Sinochem’s involvement with Pirelli, including a prohibition on the company’s involvement in strategic and financial planning, as well as the selection of the CEO.

According to the government, these restrictions are necessary to safeguard both Pirelli’s “autonomy” and the “management” of the company, as well as “information of strategic importance.”

Europe relies significantly on Chinese commerce and investment, but ideological differences, such as over Russia’s war in Ukraine, and recent measures by European Union regulators and governments to limit China’s access to critical technology have strained relations.

The mandate adopts this strategy. Pirelli is obligated to say no to the State-owned Assets Supervision and Administration Commission of the State Council of China, the entity that owns Sinochem, if it asks for any kind of information sharing, including “know-how” related to Sinochem’s patented technologies.

To further limit Sinochem’s sway, the government has stated that “some” strategic choices will require agreement from at least 80% of board directors.

When it comes to China’s Belt and Road Initiative, a global infrastructure and investment megaproject, Rome is likewise considering whether to renew its collaboration with Beijing. Only Italy among the Group of Seven has signed on to this plan.

According to the Financial Times, pharmaceutical giant AstraZeneca (AZN) is planning to spin out its China business and list it separately in Hong Kong as part of a larger strategy to safeguard its operations in the face of rising geopolitical conflict. AstraZeneca (AZN) did not provide a statement.

In an announcement made earlier this month, Sequoia Capital, a Silicon Valley VC firm, clarified that it will spin off its China assets.

According to Reuters, the European Commission will announce measures on Tuesday to prevent countries like China from gaining access to sensitive EU technology. These measures may include the screening of outbound investments and export controls.

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