Chinese Vice Premier Liu He and Valdis Dombrovskis, Executive Vice President of the European Commission, jointly presided over the eighth China-EU High-Level Trade and Economic Dialogue (HED) via video link. Commissioner for Trade Phil Hogan also attended. The two sides have reached fruitful results and consensus in terms of cooperation in a range of areas, including the joint fight against Covid-19, global economic governance, industrial chain safety, a bilateral investment treaty (BIT), WTO reform, expanding market opening-up, digital economy, finance and taxes, the Global Times reports. The coronavirus is a common challenge for humanity. China and the EU as two major economies are pushing a global unified approach in the fight against Covid-19 and for an economic rebound, and are jointly safeguarding multilateralism and free trade, Vice Premier Liu said, according to Xinhua. The EU and China are important partners, and advancing bilateral relations serves the common interest of both sides, Dombrovskis stated.

Cui Hongjian, Director of the Department of European Studies at the China Institute of International Studies, said: “There are three high-level dialogues being held between the two sides every year concerning diplomatic, economic and cultural communication. We have so far seen the resumption of two dialogues.” In June, China and EU held the 10th round of their high-level strategic dialogue via video link, with both sides vowing to develop closer ties. Cui added that both sides have displayed calmness, with the EU side in particular not bowing to pressure from Washington and maintaining an independent economic development path from the U.S. China may open up more fast-track channels for the entry of personnel of foreign companies based on the principle of reciprocal treatment. Also, more positive signals on the progress on the BIT may be released after the meeting concludes, according to Cui.

China is on course to become the only major economy to post positive growth this year, according to the IMF’s latest global economic outlook projections. The Washington-based fund put China’s growth at 1% for 2020 and forecast it to rise to 8.2% in 2021. The economy of the euro area is estimated to contract 10.2% this year before rebounding to a negative 6% the next year. Bloomberg expects China’s economy to grow 2.5% this year. Oxford Economics also upgraded its full-year GDP forecast to 2.5% from 2% on a strong rebound in the second quarter.

According to a EU press release, Executive Vice President Dombrovskis said: “The current crisis gives us no other option but to work hand in hand with our global partners, including China. By pulling together we can recover more quickly economically, and make progress on areas of mutual interest such as trade and investment relations. However, we also need to address sticking points such as reciprocity in the way our companies are treated. We will need to make further progress on these and other issues ahead of the next leaders’ summit in the autumn.” Commissioner Hogan said: “EU-China bilateral and trade relations must be based on the key principles of reciprocity and a level-playing field based on clear and predictable rules. Today I have called upon China to engage in serious reform of the multilateral system and its rulebook and to remove the existing barriers impeding access to the Chinese market of EU exporters of goods and services as well as of European investors. Such an approach by China would show a level of responsibility which reflects its economic and trade importance.”

On market access, the EU reiterated its request for improvements of China’s offer in the telecommunication and computer sectors, health, biotechnology and new energy vehicles (NEVs). On sustainable development, the EU insisted upon the political importance of meaningful commitments in this area and the need for China to increase its ambition and engagement.

With regards to market access, the EU recalled its request to China to authorize member states’ exports of agricultural products currently awaiting export authorization, as is the case in the beef and poultry sector. The EU also outlined its concerns about new restrictions on food exports, on the ground of controlling the coronavirus pandemic, leading to an increased number of unjustified inspections, controls and requests for certificates on EU exports of agricultural products. Both sides also discussed market access in the financial services sector, with the EU side encouraging China to continue opening China’s financial services market to foreign investment, according to the EU press release.

The EU Council also expressed “grave concerns” over Hong Kong’s national security law and approved restrictions on exports of equipment for end use in Hong Kong, eliciting a stern response from the Chinese Mission to the EU. “China is firmly against the EU’s wrong moves and has made serious representations with the EU side,” a spokesperson for the mission said.

The U.S. government ordered the closure of the Chinese Consulate in Houston, effective July 24, and China ordered the closure of the U.S. Consulate in Chengdu in retaliation. This is the latest indication of fast deteriorating China-U.S. relations.

China’s Foreign Ministry strongly condemned the U.S. for abruptly asking China to close its Consulate General in Houston within 72 hours, which the Global Times called “a reckless and dangerous move”. “This is a unilateral political provocation by the U.S. side against China, a grave violation of the international law and basic norms governing international relations, a grave violation of relevant provisions of the China-U.S. Consular Treaty, and a deliberate attempt to undermine China-U.S. relations”, Wang Wenbin, Spokesperson of the Chinese Foreign Ministry, said. He added that the latest move to ask China to close its Consulate General in Houston is “an unprecedented escalation of its moves against China”. The Consulate General in Houston is the first Chinese Consulate General established in the U.S. in August 1979, after diplomatic relations were established between the two countries on January 1, 1979. Observers also called the move “unprecedented”, saying it would trigger a broader earthquake in diplomatic ties between the two countries. The last time the Trump administration ordered a foreign consulate in the U.S. to close was in August 2017, when it ordered Russia to close its Consulate in San Francisco and two diplomatic annexes in New York and Washington.

Xin Qiang, Deputy Director of the Center for American Studies at Fudan University in Shanghai, told the Global Times that the U.S. move, which is unprecedented in the history of China-U.S. relations, indicated a serious escalation in the bilateral confrontation and will definitely result in countermeasures from China. China also accused to U.S. of imposing unwarranted restrictions on Chinese diplomats in the U.S., opening Chinese diplomatic packages and seizing Chinese official supplies, all violations of the Vienna conventions on diplomatic and consular relations, the Global Times reports.

The U.S. said the move was made to “protect Americans’ intellectual property and private information”. David Stilwell, a senior official for East Asia affairs at the U.S. State Department, said that the Houston Consulate was the “epicenter” of efforts by the Chinese military to send students to the U.S. to obtain information that could advance its warfare capabilities.

The closure of the Chinese consulate seriously harms bilateral ties. It could also put business ties between China and the eight U.S. states that the Consulate serves in jeopardy, as the work of the Consulate to promote economic and trade cooperation would be stopped, according to former Chinese diplomats, experts and business leaders in the U.S. Houston attracts a large number of Chinese people studying, working and living there for its developed petroleum and aviation industries. The closure of Chinese Consulate General sent shockwaves throughout the local Chinese community. There are more than 400,000 Chinese citizens and overseas Chinese in Houston, according to the Chinese Consulate General in Houston. The closure could endanger USD60 billion worth of trade between the eight U.S. states the Consulate covers and China, as well as hundreds of Chinese businesses operating in southern U.S. states. In 2019, the eight states had trade worth at least USD61.7 billion with China. Texas is the biggest exporter to China among all 50 U.S. states, with exports totaling USD11.05 billion in 2019, according to the Consulate. As of March, there were also 208 Chinese companies with investments in Texas, the Global Times reports.

China’s Foreign Ministry ordered the closure of the U.S. Consulate in Chengdu in retaliation. An online poll by the Global Times indicated that respondent would have preferred China to close the U.S. Consulate General in Hong Kong, would this would have been seen as an escalation, which the Chinese government wanted to avoid. Closing the U.S. Consulate in Wuhan would have been seen as to “soft” a measure, as no U.S. diplomats had returned there since the outbreak of the Covid-19 pandemic in the city.

The U.S. is seeking to further escalate its crackdown on Chinese technology companies, as a new report by Bob Menendez, a ranking member of the U.S. Senate Foreign Relations Committee, called China’s technology development “digital authoritarianism”. The report said the Trump administration had failed to respond to China’s rise in cyberspace and called on the U.S. government to rally its allies to counter China. “The U.S.’ intention is to contain China’s rise and maintain its hegemony in the tech sector,” Li Yi, Chief Research Fellow at the Internet Research Center under the Shanghai Academy of Social Sciences, told the Global Times. The U.S. House of Representatives also voted to prohibit federal employees from downloading the TikTok app on government-issued devices. The move could pave the way for broader crackdowns by the U.S. government on not just TikTok but also other Chinese apps such as WeChat. The U.S. also indicted two Chinese nationals for allegedly stealing U.S. coronavirus data. “The U.S. has been carrying out the world’s widest espionage activities, but it made groundless accusations against other countries for cyber attacks, which was like a thief crying “stop the thief,” Foreign Ministry Spokesperson Wang Wenbin said.

The U.S. also added 11 Chinese companies to its Entity List for alleged human rights abuses in Xinjiang, raising the number of Chinese companies being restricted from purchasing goods and services from the U.S. to 48. The U.S. move aims to strip these Chinese companies from industrial chains. Included on the list are KTK Group, which produces more than 2,000 products, from electrical appliances to products used in high-speed trains; and Tanyuan Technology, whose main products are graphite film with high thermal conductivity. The biggest impact of being included on the Entity List will be on textile companies.