ROME – Italy is studying ways to curtail the influence of China’s Sinochem on tyre maker Pirelli, in the latest sign of rising tension between China and Western countries over the control of key technologies.

Italian officials are currently discussing several options, as part of talks with Pirelli investors over the company’s ownership structure, according to people familiar with the matter who asked not to be named on confidential issues. Sinochem is Pirelli’s largest shareholder.

Options include limiting information sharing on sensitive and strategic technology with Sinochem-appointed board members, the people said. They may also involve limiting the voting rights of board members appointed by Sinochem. No decision has been taken and talks are ongoing.

Spokesman for Pirelli and Italy declined to comment. Sinochem did not respond to out-of-hours requests for comment.

Tech competition

The discussions reflect a dilemma in Europe about doing business with Beijing as relations between the United States and China are quickly deteriorating over issues ranging from export controls to sanctions over human rights.

While European countries generally support President Joe Biden’s push to contain China’s economical and technological rise, they are hesitant to drastically cut ties with a key trading partner. Chinese President Xi Jinping aims to use a visit this week by French President Emmanuel Macron to create some distance between Europe and the US.

The dilemma is particularly delicate for Italian Prime Minister Giorgia Meloni. 

Italy is the only Group of Seven country that has signed a memorandum of understanding with China on its Belt and Road initiative. The pact, which has a limited practical impact but high symbolic value, will be automatically extended in 2024 unless Ms Meloni decides to opt out, a move that could risk retaliation from Beijing.

Italy is also considering crafting measures so that they do not target China directly, but a broader array of countries which are not considered strategic partners, according to the people.

Golden power

Italy will soon get a chance to intervene on Pirelli by using its so-called “golden power”, which enables the government to stop or modify business deals among private companies operating in strategic sectors. Pirelli specialises in high technology tyres and is a supplier of super carmakers, as well as a partner of Formula 1 racing. 

The company recently notified the Italian government of the intention to renew a shareholder pact between Sinochem and Camfin, the financial holding of Pirelli’s chief executive Marco Tronchetti Provera.

The pact is seen as a brake on Pirelli, as Chinese involvement requires the company to seek government’s approval for most business decisions according to golden power rules.

The options under consideration would not alter the shareholding structure nor force Sinochem to sell, but they would limit China’s ability to influence the company’s business. BLOOMBERG