China bans government procurement of EU medical devices worth over 45M yuan in retaliation for EU trade restrictions

China has hit the European Union with a retaliatory ban after the continent’s governing body decided to limit Chinese participation in public tenders for medical devices.

Both the EU and China are escalating measures to sever ties and reliance on each other in critical sectors such as green technologies, healthcare, and advanced manufacturing.

China has begun restricting the imports of high-value medical devices from the European Union, intensifying a growing trade dispute between the two countries as a result.

China bans high-value EU medical devices

On Sunday, China’s finance ministry announced that government procurement of medical equipment from the EU worth more than 45M yuan, approximately $6.3M, will no longer be permitted.

This announcement is a direct response to the European Union’s decision last month to limit Chinese participation in public tenders for medical devices within its member states. That was the first time the EU invoked the International Procurement Instrument (IPI).

The EU stated that they had unequal access to China’s medical market and so were justified in the ban, saying European companies were routinely denied fair opportunities to compete in Asia’s largest and most lucrative healthcare sector. Notably, the EU’s medical device sector rakes in $70B per year.

Tensions have been building between both countries over recent months due to back and forth trade restrictions. The EU’s restrictions fall under its International Procurement Instrument, a law that came into force in 2022 and is aimed at enforcing reciprocity in public procurement markets.

In a separate statement, the Chinese commerce ministry criticized the EU’s actions, stating that the EU has insisted on going its own way.

“Regrettably, despite China’s goodwill and sincerity, the EU has insisted on going its own way, taking restrictive measures and building new protectionist barriers.”

In addition to banning direct procurement of EU-made medical devices valued above 45M yuan, Beijing is blocking imports of devices from other countries that include more than 50% EU-made components by contract value. These measures came into effect immediately on Sunday, July 6.

The commerce ministry clarified that the new policy will not affect products made by European firms operating within China.

Trade frictions persist

Tensions have been building between the EU and China over the past months. Last month, the European Commission announced new tariffs on Chinese electric vehicles.

The European Commission cited subsidies that distorted the global market as a reason for the decision. In retaliation, China launched an investigation into EU brandy imports, which concluded just days ago with the imposition of duties of up to 34.9% on EU-origin brandy, most notably French cognac.

Other major French producers like Pernod Ricard, LVMH, and Remy Cointreau were exempted from these duties under undisclosed conditions.

Analysts view the medical devices ban as a strategic means of protecting Beijing by signaling its willingness to push back forcefully against European restrictions.

China’s finance ministry emphasized the principle of reciprocity, saying it had no choice but to implement countermeasures after repeated diplomatic overtures were met with resistance.

“China has no choice but to adopt reciprocal restrictive measures,” the ministry stated bluntly.

So far, the European Union has not issued an official response. The EU delegation in Beijing also did not immediately respond to media requests for comment following China’s announcement.

A planned EU-China leaders’ summit is scheduled to take place in China later this July. The gathering is expected to focus on economic relations, climate change, and global security, but the deepening trade rift could overshadow the intended agenda.

Observers say the timing of Beijing’s announcement could be a deliberate effort to apply pressure ahead of the summit.

While both countries have emphasized the importance of dialogue and cooperation, the current trajectory of trade policy points to growing fragmentation between the second and third largest economies in the world.

For European medical device manufacturers, the new Chinese restrictions could deal a significant blow, especially for companies that relied on large government contracts. Multinational firms will also need to evaluate whether or not to localize more of their production in China or seek alternative markets.

Likewise, the EU’s restrictions will likely continue to exclude Chinese firms from a share of public healthcare tenders in Europe.

KEY Difference Wire helps crypto brands break through and dominate headlines fast