Nuctech, the Chinese security equipment supplier raided by EU authorities, has won more than 160 public tenders in Europe over the past decade despite national security warnings about the company’s products.
Targeted this week by Brussels for receiving “distortive foreign subsidies”, the Chinese state-owned company produces cargo, baggage and human scanners that are deployed all across Europe, from border checkpoints to the continent’s biggest seaports handling tens of millions of containers each year.
Headed for a time by former president Hu Jintao’s son, Hu Haifeng, Nuctech has long been criticised for its close links to Beijing and has been red-flagged by the US over potential risks to national security.
Kristian Vanderwaeren, head of Belgian customs, said possible security risks included Nuctech accessing internal customs systems linking scanner images with data about shipments.
“You can have access to our system . . . Once you’re in the system you can have an insight into all our customs declarations in Belgium,” Vanderwaeren said. “You can have a complete insight into the in and out of movement [through] Belgium.”
Nuctech said in a statement that its equipment “is protected from illegal data collection and security breaches by thorough controls, including from state authorities”.
“All data generated by Nuctech’s devices belongs to our customers only,” it added. The company said it was “co-operating with the European Commission and is committed to defending its reputation as a fully independent and self-supporting economic operator”.
The raids this week at Nuctech’s Rotterdam and Warsaw offices are part of a broader crackdown by Brussels on Chinese companies seen to be unfairly benefiting from subsidies from Beijing at the expense of European rivals.
But they also show a shift in tactics from Brussels to pursue foreign companies deemed potential security risks by targeting the trade practices they use to gain a foothold in the EU market.
The raids prompted an angry response from China’s commerce ministry, which said they were “protectionist” acts that “violate[d] the principle of due process”.
Despite warnings from Lithuania, Belgium and other EU governments, a Financial Times analysis of European Commission documents shows that governments in Europe awarded more than 160 contracts to Nuctech over the past 10 years. This data excludes contracts made directly with private companies.
The publicly disclosed deals — made with both national and EU funds — related to security equipment, including airport baggage scanners and goods X-ray machines, amounting to more than €120mn since 2014. EU rules mandate that all public tenders above a certain cost threshold must be registered in a Brussels database.
The latest contract, awarded to Nuctech last month, was worth some €3.5mn for X-ray equipment purchased by tax authorities in the southern Polish city of Rzeszów, which is the main hub for western weaponry being supplied to Ukraine.
Liza Tobin, a former China director at the US National Security Council, told a conference last year that “Nuctech poses a multi-faceted threat to our security and our resilience”.
The US has imposed restrictions on companies using its products “given the company’s control by the [Chinese] government”.
Nuctech was created in the late 1990s as a spin-off from China’s elite Tsinghua University to manufacture large security scanners for shipping containers and railway cars, as well as luggage scanners and metal detectors for airports.
Under Hu, it was granted a virtual monopoly on the scanner industry, securing about 90 per cent of the Chinese market. Hu, today a vice-minister in Chinese President Xi Jinping’s government, no longer has any known association with the company.
But Nuctech is a subsidiary of Tsinghua Tongfang, which is partly owned by China National Nuclear Corporation, a powerful civilian and military nuclear group.
Nuctech’s machines have been purchased by the ports of Rotterdam and Antwerp, airports in Stockholm and Pisa, and Brussels’ Eurostar terminal for trains to the UK.
Despite Belgium imposing a ban on purchasing Nuctech equipment in 2023, some of its products remain in use, including several container and baggage scanners. Vanderwaeren said the risks were reduced because the machines were not connected with customs IT networks.
“Standalone equipment . . . only has images and no extra data,” Vanderwaeren said. “Even if those systems are hacked . . . there is no important risk.”
Estonia’s Tax and Customs Board also said its Nuctech scanners “are not connected to any other information systems or databases” and that “all potential security risks [are] being taken into account”.
Many other countries have purchased Nuctech X-ray and other machines, including Italy, Hungary, the Netherlands, Croatia, Denmark, Bulgaria, Latvia and Lithuania.
Airports Council International Europe said Nuctech scanners were “legitimately procured in the course of official tenders on the basis of their certification” by EU and UK authorities.
“Any move to blacklist the company would have wide implications for European security infrastructure, considering the planned longevity of machines now in use (10 years) before they are due for replacement, and the associated cost,” it added.
Concerns about the company’s “rapid expansion in Europe, often through dumping prices” were also raised by European parliamentarians in 2022; they flagged the “risks of adopting Chinese technology in our border security systems”.
Bart Groothuis, a Dutch liberal MEP who led the effort, said the concerns about Nuctech reflected wider possible issues with Chinese companies “trying to buy themselves into infrastructure”.
“Nuctech is just one part of the larger efforts of the Chinese to gain a foothold in Europe,” he said.
Several of the contracts listed said Nuctech offered “the most economically advantageous tender”.
Groothuis said selling goods at “an unreasonable price” could “trigger” the commission to look into Beijing undercutting its European rivals.
Senior EU officials said they believed they have a strong case against Nuctech, with Tuesday’s dawn raids used as a last-resort measure to gather evidence in the probe.
They said the company faced fines amounting to up to 10 per cent of its global revenue if it is found to have broken EU law.
“The role that public financing plays in their system and their aggressive commercial policy makes it natural that China is more in scope. We will continue to use all the powers we have whenever we have suspicions,” one of the officials said.
The commission imposed provisional anti-dumping duties on the company in 2009, after rivals accused the company of systematically undercutting them on price using government subsidies.
The company says it operates in 170 countries, has more than 4,300 staff and annual revenue of €840mn.
The commission declined to comment.
Additional reporting by Javier Espinoza and Andy Bounds in Brussels, Richard Milne in Oslo and Amy Kazmin in Rome
