China-EU Play Nice Despite Widening Cracks

On June 20, it announced the exclusion of Chinese companies from the EU government's procurement of medical devices exceeding €5 million (approximately US$5.84 million). It said the measure aims to incentivize China to cease discriminating against EU firms and EU-made medical devices, and to treat EU companies with the same openness as the EU treats Chinese companies and products.

China retaliated against the EU by restricting the purchase of European medical equipment and imposing tariffs on Brandy. However, China still wants to maintain a good relationship with the EU, which was also hit by the Trump administration's reciprocal tariffs in April.

US President Donald Trump said the US would impose a 30% tariff on imports from Europe on August 1 if the two sides could not reach a trade deal. Media reports indicate that the US may agree to impose only a 15% tariff on European products, but a final agreement has not been reached.

On July 16, China removed entry restrictions on Reinhard Buetikofer, the former EU lawmaker who was sanctioned by China in 2021 due to his comments on human rights issues of Uighurs in Xinjiang. Chinese commentators said China wanted to show a friendly gesture to Brussels ahead of the EU-China Summit, but the EU replied with sanctions on two Chinese banks.

“China removed entry restrictions on Buetikofer to pave the way for the 50th anniversary of the establishment of diplomatic relations between China and the EU,” a Fujian-based writer says in an article .“The outside world described it as China's 'strategic gift package' for the EU.”

“However, the EU did not respond to this gift for three days and suddenly announced the 18th round of sanctions against Russia on July 19 and added over 10 Chinese companies to its Entity list,” he says.“The sanctioned entities include two small Chinese banks, Heilongjiang Suifenhe Rural Commercial Bank and Heihe Rural Commercial Bank, which were accused of 'helping Russia circumvent sanctions'.”

The writer notes that the annual transactions settled by the two banks were relatively small compared to Gazprom's daily exports. He says people in Heilongjiang use cash to trade Chinese electric heaters and Russian flour, but the EU was upset and blamed China for these legal activities.

He says the EU wants a tough stance against China to please Washington and gain bargaining chips in the US-EU trade negotiations.

A Yunnan-based columnist says it's unfair that the EU, which imported 18% more liquefied natural gas (LNG) from Russia last year, accused Chinese firms of having legal cooperation with Russian counterparts.

“The EU exposed the nature of its 'de-risking' strategy towards China in this incident,” he says.“China has long been the EU's second-largest trading partner. However, with the rise of China in new energy, semiconductors, and other sectors, the EU's positioning of China has shifted from 'partner' to 'systemic rival', trying to use sanctions to slow China's growth.”

He says the EU is like committing suicide as it sanctions Chinese firms, and at the same time asks China for rare earth elements.

Reuters reported on April 22 that major Russian banks have set up a netting payments system called“The China Track” to settle Russia's trade with China.

The report, citing banking sources, stated that the new system, which has been in place for some time, was established by several sanctioned Russian banks and some intermediaries registered in countries that Russia considers friendly.

It said each bank operates several verified payment agents, some of whom handle payments for exports, while others handle payments for imports.

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The minimum cost of the“China Track” service, including commissions and exchange rate differences, is approximately 0.5% for exports and 1% for imports, compared to 2-4% outside the system and up to 12% at the height of the issue last year. The involved banks can complete the payment within two days.

The service is now available in 11 Chinese provinces that have strong manufacturing sectors.

According to an article published by the Heilongjiang-based Tianfusheng International Logistics Co on May 6,“The China Track”, a secret trade settlement channel between China and Russia, is now online.

Tianfusheng said top Russian banks have jointly established this highly encrypted payment system to facilitate bilateral trade between Russia and China. It said this system can effectively bypass the SWIFT system and the West's monitoring, helping involved parties reduce sanction risks.

In another article , Tianfusheng promoted its“golden route” service, which guarantees that it can transport goods from China to“anywhere in Russia” within eight days. The company said it has 150 trucks and an innovative tracking system.

It claimed that its trucks can reach their final destinations directly without transit and complete customs clearance smoothly under the Transports Internationaux Routiers (TIR), a global customs transit system overseen by the United Nations Economic Commission for Europe (UNECE).

Read: China's patience wears thin with EU over medical device row

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