Milan, Italy – Reuters reports that the Italian government is concerned about plans to allow top shareholder China’s Sinochem to appoint more board members and potentially choose future CEOs to Italian tire maker Pirelli.

Italy’s right-wing government has to approve the scheme under “Golden Power” rules aimed at protecting assets deemed strategic for the country, at a time when relations between China and Western countries have entered a tenser phase.

Sinochem, Pirelli’s largest shareholder with a 37% stake, notified the Italian government in March of plans to renew and update an existing shareholder pact with fellow investor Camfin, the vehicle of Pirelli’s CEO Marco Tronchetti Provera.

Based on the new shareholders’ agreement, which came into force last week and lasts three years, Sinochem would pick nine members of Pirelli’s 15-strong board, leaving three to Camfin. Under the previous pact, Camfin could choose four board members.

Sinochem’s voting rights in Pirelli are currently frozen pending Italy’s assessment of the new governance agreement.

Pirelli will appoint a new board at a shareholders meeting, expected on July 31, with current deputy CEO Luca Bruno becoming the new CEO following his designation by Tronchetti Provera.

The government, however, is also looking into future CEO appointment procedures as the new shareholders’ agreement no longer gives designation powers to Tronchetti Provera, leaving the choice to the Chinese-controlled board, the sources said.

Also, were the Sinochem-Camfin agreement not renewed in three years, Sinochem would theoretically be free to establish an even stronger majority of board members and increase the Chinese element in top ranks, the people added.

Italy and other Western governments are increasingly concerned about growing Chinese influence.

Italy’s use of golden powers in most cases results in deals being approved with binding prescriptions issued to preserve the national interest. These may include limiting information sharing on sensitive and strategic technology or voting rights on specific matters.