The Dutch government is working on legislation that will be used to bar Chinese students from university programs on sensitive technologies including semiconductors and defense, according to people with knowledge of the matter.

While the language in the planned legislation will likely avoid specifically mentioning China, the clear intention is to prevent students from the Asian nation from gaining access to sensitive material in their studies, the people said, asking not to be identified as the deliberations are private.

The measures, which are still in the draft phase, are the latest escalation in a diplomatic fight between the Netherlands and China over the semiconductor industry. Earlier in 2023, the Dutch government agreed to join the U.S. effort to further restrict exports of chip technology to China and started an investigation into the takeover of local chipmaker Nowi by a Chinese-owned firm Nexperia, stoking tensions with one of its biggest trading partners.

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The Dutch Ministry of Education confirmed that it is working on measures to introduce a mandatory screening of students and researchers in sensitive subject areas, according to an emailed statement. It said that any measures would be country-neutral and not target any specific country, the ministry said.

A recent Dutch intelligence agency report claimed that China “poses the greatest threat” to the nation’s economic security. The country is one of the Netherlands’ biggest trading partners.

The intelligence agency said many Dutch companies and institutions find it difficult to make a proper risk assessment of economic and scientific cooperation with China. “The country often conceals that the Chinese government or the Chinese army may be involved in such cooperation in the background,” said the report. “The disadvantages of cooperation often only become apparent in the longer term.”

It also said that China targets Dutch high-tech companies and institutions through “corporate takeovers, academic cooperation, as well as illegitimate (digital) espionage, insiders, covert investments and illegal exports.”

Earlier in 2023, ASML Holding NV, a critical cog in the global semiconductor industry, accused a former China-based employee of stealing confidential information. The Dutch technology company, which makes machines needed to produce high-end chips used in everything from electric vehicles to military gear, initiated an internal investigation and tightened security controls after discovering the incident, which may have violated export controls.

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The Netherlands, one of the world’s top sources of machinery and expertise needed to make advanced semiconductors, is facing increasing pressure from Washington to help forge a global blockade to stifle Beijing’s rise in chip-making. But ASML is the country’s and Europe’s most valuable tech company and one of China’s biggest customers.

The Dutch have been navigating a middle ground between the U.S. and China in the escalating battle over the world’s chip supply chain. Dutch measures to expand restrictions on exports of the latest semiconductor technology appeared to fall short of measures the Biden administration took in 2022 as the U.S. spearheads efforts to limit exports of machinery and know-how to China.

According to a recent Wall Street Journal report, the Dutch decision to bar some Chinese students comes as the number of U.S. student visas issued to Chinese nationals plunged by more than 50% during the first half of 2022 compared to pre-COVID levels amid strained political ties.

The Dutch government recently implemented the Investments, Mergers and Acquisitions Security Test Act, which enables it to limit the size of investments or block a deal with international companies on the basis of national security. Like the anticipated law on screening students, the new legislation on acquisitions is also country neutral. But, “at the moment, Russia and China” are among countries the Netherlands needs to be “extra alert” about, Economic Affairs Minister Micky Adriaansens told Bloomberg in an interview.

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The Financial Times previously reported that the government plans to vet international students from China due to potential risk to national security, citing an interview with the Dutch Education Minister Robbert Dijkgraaf.

Dutch universities currently decide independently on the admission applications of international students and researchers applying for sensitive programs. They have the option to reach out to a government-led question booth on how to deal with these considerations. In 2022, 89 questions were filed to the government from universities; 52 were about China, 21 were Russia-related and 16 were on Iran, Dijkgraaf said in a letter to parliament in December 2022.

In April 2023, ASML and the Eindhoven University of Technology announced a shared research program that will cost “several hundred million euros” on artificial intelligence and semiconductor lithography. The program, which will include an ASML cleanroom on the university campus and the firm’s engineers teaching international scientific talents, will create up to 40 Ph.D. positions yearly, according to a statement.