MNI: Beijing, EU Hope For Deal - Advisors

Beijing still hopes to resolve trade frictions with the European Union, and to separate its dealings with the bloc from its disputes with the U.S., Chinese policy advisors told MNI, while an official in Brussels said the EU is optimistic that it will obtain an agreement to loosen restrictions on rare earth exports. 

While China is unhappy with the EU’s increasing alignment with the U.S. on issues such as rare earths, as well as with the Dutch government’s move to take control of Chinese-owned chipmaker Nexperia, advisors said Beijing continues to view the EU as a strategic partner and has little desire for escalation towards a trade war. However, they added that this attitude could change if the EU acts repeatedly in ways it regards as provocative.

This week’s phone call between European Trade Commissioner Maros Sefcovic and Chinese Commerce Minister Wang Wentao has also helped to ease tensions, said Wang Caixiao, associate professor at the School of Europe, Beijing International Studies University.

CHALLENGES

But challenges remain. The EU imposed steep tariffs on Chinese-made electric vehicles last year and Beijing is also worried by potential EU rules which would require Chinese companies investing in Europe to transfer technology to European companies.

"Everything indicates that the EU and Commission is ready and preparing for a deal with China," on rare earths, an EU official told MNI. Still, despite its optimism, Brussels is also preparing for a negative scenario, readying possible counter-measures targeting areas such as aviation parts, older deep ultra-violet lithography machines and specialty steels in case no agreement can be reached. (See MNI: EU To Try To Negotiate With China On Rare Earths Access)

"The Commission has learned from its mistakes in handling the U.S. Better late than never," the EU source said, referring to widely-criticised concessions made in the bloc’s trade agreement with Washington. 

Both the U.S. and the European Union recognise that China’s rare earth supplies cannot be replaced quickly, said He Weiwen, senior fellow at the Center for China and Globalisation, adding that the EU should avoid becoming “a pawn” in U.S. efforts to provoke China. (See MNI: Trump-Xi Meet Likely, But Any Deal Modest-China Advisors)

“Prospects for future cooperation between China and Europe are greater than those between China and the U.S.,” He noted, suggesting that a ‘green channel’ mechanism could be established, if both sides reach a constructive solution, to expedite the approval of rare earth exports to European companies for normal civilian use.

However, Cui Hongjian, professor at the Academy of Regional and Global Governance at Beijing Foreign Studies University, cautioned that the EU’s decision to immediately coordinate its response to rare earth restrictions with the U.S. within the G7, together with the Nexperia seizure, have been interpreted by Beijing as politicising an an otherwise technical debate.

“Although both sides are neither willing nor likely to head toward outright confrontation or a trade war in the foreseeable future, bilateral relations will become increasingly volatile,” Cui said, adding that there was a danger that mutual trust could be significantly eroded. 

TECHNOLOGY TRANSFER

Wang said that any new EU rules insisting on technology transfer would go against the bloc’s own principles of non-discrimination, fair competition and WTO rules. Alternatively, the EU may establish an incentive mechanism that links subsidies or other benefits to technology co-creation with European partners, he said.

Liu Zhiqin, senior researcher at the Institute for Financial Studies at Renmin University, said China and the European Union can still achieve a mutually beneficial outcome by negotiating the extent, proportion and timeframe of technology transfer, particularly given that the EU and the United States have long maintained control over patents and intellectual property rights in China.

He Weiwen noted the importance of China stepping up imports from Europe. During the first nine months of 2025, Chinese exports to the EU increased by 49.2% over the same period of 2020, and its imports from the EU increased by only 8.5%. 

Future arrangements could see the EU expanding exports of high-end equipment, medical devices, luxury goods and services to China, while Chinese firms boost their R&D, manufacturing, sales and after-sales operations in Europe, Wang said.