Italy has imposed several curbs on Pirelli's biggest shareholder, Sinochem, in a move aimed at blocking the Chinese government's access to sensitive chip technology.
The Italian government decided last week to make use of its so-called "Golden Power" regulations, designed to protect assets of strategic importance to the country, Pirelli said in a statement Sunday.
The government order risks inflaming tensions between Europe and Beijing, and follows similar intervention by Germany and the United Kingdom to protect their semiconductor technology.
Earlier this year, Europe joined a US-led effort to restrict China's access to the most advanced chipmaking technology when the Netherlands — home to ASML Holding, a key supplier to the global semiconductor industry — said it would introduce export controls.
Italy's move comes as US Secretary of State Antony Blinken wraps up a high-stakes visit to China aimed at repairing strained relations between the world's two biggest economies.
Sinochem, owned by the Chinese government, is Pirelli's biggest single shareholder, with a 37% stake, and has 60% of seats on the board of the Italian tire maker. CNN has contacted Sinochem for comment.
In a statement Friday, the Italian government said Pirelli's Cyber Tyre, which uses chip technology to collect vehicle data, is "configured as a critical technology of national strategic importance."
"Improper use of this technology can pose significant risks not only to the confidentiality of user data, but also to the possible transfer of information relevant to security," the statement added.
The order sets a host of limitations on Sinochem's involvement in Pirelli, including a bar on it devising the company's strategy and financial plans, or appointing a CEO.
The government said these curbs would protect the "autonomy" of Pirelli and its management, as well as "information of strategic importance."
Europe is heavily reliant on China for trade and investment, but relations have come under strain from ideological differences, including over Russia's war in Ukraine, and recent moves by European Union regulators and governments to limit China's access to sensitive technology.
The order takes a page out of this playbook. It requires that Pirelli refuse any requests from Sinochem's owner — China's State-owned Assets Supervision and Administration Commission of the State Council — for information sharing, including any information connected to the "know-how" of proprietary technologies.
The government said "some" strategic decisions would require approval from at least 80% of board directors, a further limitation on Sinochem's influence.
Separately, Rome is also assessing whether to renew its partnership with Beijing on the Belt and Road Initiative — China's global infrastructure and investment megaproject. Italy is the only Group of Seven nation to have joined the initiative.
In a further sign of the steps multinational companies are beginning to consider to protect their operations from growing geopolitical friction, drugmaker AstraZeneca has drawn up plans to spin off its China business and list it separately in Hong Kong, according to the Financial Times. AstraZeneca declined to comment.
Earlier this month, Sequoia Capital, the Silicon Valley venture capital group, said it would separate its China investments into an independent unit.
On Tuesday, the European Commission will unveil measures — possibly including screening of outbound investments and export controls — to keep prized EU technology from countries such as China, Reuters reported.
— Laura He in Hong Kong contributed to this article.
