TL;DR
China condemned the EU’s 20th sanctions package, which designated approximately 27 Chinese and Hong Kong entities for supplying dual-use goods to Russia’s military-industrial complex. Beijing retaliated within 24 hours by placing seven EU defence firms on its own export control list, framing the move as a Taiwan issue rather than acknowledging the Russia connection. The EU is caught in a structural contradiction: its sanctions policy requires restricting Chinese tech flows to Russia, but its defence buildup depends on Chinese rare earth magnets and critical minerals that Beijing can restrict in return.
China’s Ministry of Commerce issued a formal condemnation on Saturday after the European Union included approximately 27 Chinese and Hong Kong entities in its 20th sanctions package against Russia, the largest round of listings in two years. Beijing said the move “runs counter to the spirit of the consensus reached between Chinese and EU leaders, and seriously undermines mutual trust and the overall stability of bilateral relations,” and warned that China would “take necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises” with “the EU side bearing all consequences.” Within 24 hours of the sanctions’ adoption on April 23, China placed seven EU entities on its own export control list, banning all dual-use exports to them. The retaliatory designations targeted defence firms in Belgium, Germany, and the Czech Republic, but Beijing framed the restrictions not as a response to the Russia sanctions but as punishment for “arms sales to or collusion with Taiwan,” a diplomatic sleight of hand that allows China to escalate without acknowledging the underlying dispute.
The package
The EU’s 20th sanctions package was adopted on April 23 after a two-month delay caused by vetoes from Hungary and Slovakia, which had linked their approval to the resumption of Russian oil flows through the Druzhba pipeline. When flows resumed, both countries dropped their objections. The package adds 120 new individual and entity listings, targets 56 entities in Russia’s military and energy sectors, imposes transaction bans on 20 Russian banks and four third-country financial institutions involved in circumvention, lists 46 additional shadow fleet vessels for a total of 632, introduces new restrictions on cryptocurrency platforms and digital ruble transactions, and, for the first time, designates an entire jurisdiction, the Kyrgyz Republic, as a “systematic and persistent circumvention risk.” Alongside the sanctions, the EU adopted a 90 billion euro loan to Ukraine. Kaja Kallas, the EU’s high representative for foreign affairs, announced that work on the 21st package had already begun.
The Chinese entities were sanctioned across two categories. Sixteen entities in third countries, including China, the UAE, Uzbekistan, Kazakhstan, and Belarus, were designated under asset freezes for providing dual-use goods or weapons systems to the Russian military-industrial complex. Twenty-eight of 60 entities added to the enhanced export restrictions list are located in China and Hong Kong, facing tighter controls on dual-use technology exports. China Space Sanjiang Group, a state-owned enterprise, was sanctioned under the Belarus sanctions regime for the first time as co-founder of Volat-Sanjiang, which produces wheeled chassis for military equipment including multiple launch rocket systems. The escalation is clear: the 16th package in February 2025 hit 7 Chinese entities; the 17th added 5; the 18th added 2 financial institutions; the 19th targeted 12, including Chinese refineries buying Russian crude; and the 20th reaches 27. Each package goes further, and each response from Beijing grows sharper.
The trade
The 💜 of EU tech
The latest rumblings from the EU tech scene, a story from our wise ol’ founder Boris, and some questionable AI art. It’s free, every week, in your inbox. Sign up now!
China-Russia bilateral trade stabilised at $245 billion in 2024, more than double the 2020 level, before declining 6.9% in 2025 as financial sanctions complicated payment channels and Chinese banks grew cautious about secondary sanctions exposure. The decline did not extend to the goods that matter most to the sanctions debate. China exported $1.9 billion in “high priority” dual-use items to Russia in the first half of 2025 alone. Full-year dual-use shipments exceeded $4 billion in both 2024 and 2025. Manganese ore exports to Russia surged from 42 tonnes in 2023 to 47,000 tonnes in 2024 to 126,000 tonnes in the first half of 2025. Chinese turbojet engine exports to Russia in the first half of 2025 exceeded the combined total for 2023 and 2024 by 37%. Prices for export-controlled Chinese goods shipped to Russia rose by an average of 87% between 2021 and 2024, compared with 9% for the same goods shipped to other countries. The premium reflects the risk and the leverage: Chinese suppliers know the goods are scarce and charge accordingly.
The United States has been sanctioning Chinese firms for Russia support since 2024, earlier and more aggressively than the EU. In October 2024, the Treasury Department sanctioned two Chinese drone companies for producing long-range attack drones for the Russian Air Force, the first US designations of Chinese firms for directly manufacturing weapons for Russia. In 2025, more than 20 Chinese and Hong Kong companies were sanctioned for providing critical inputs to Russia’s defence industry. The Commerce Department blacklisted Shanghai Fudan Microelectronics for technology transfers. Congress introduced the STOP China and Russia Act to codify sanctions against mutual military support. The EU’s 20th package brings European policy closer to the American posture, which Beijing views as coordinated containment. Escalating chip export controls targeting China, including the MATCH Act advancing through Congress, reinforce Beijing’s narrative that Western technology restrictions are designed to suppress Chinese industrial capacity, not merely to enforce sanctions on Russia.
The retaliation
China’s response was immediate and calibrated. The seven EU entities placed on China’s export control list are all defence firms: FN Herstal and FN Browning in Belgium, HENSOLDT AG in Germany, and OMNIPOL, EXCALIBUR ARMY, SPACEKNOW, and VZLU AEROSPACE in the Czech Republic. All are banned from receiving any Chinese dual-use exports, and overseas organisations are prohibited from transferring China-origin dual-use items to them. The framing as a Taiwan matter rather than a Russia matter is diplomatically useful for Beijing because it avoids legitimising the premise that Chinese firms are materially supporting Russia’s war effort while still imposing costs on European industry.
The broader retaliation operates through China’s rare earth export controls. The EU imports 98% of its rare earth magnets from China. Licensing approvals for European firms have fallen below 25% in some sectors. Rare earth prices have spiked up to six times higher outside China than within it. European carmakers, semiconductor fabs, and defence companies have been forced to cut utilisation rates or temporarily shut production lines. Record defence tech investment across Europe, which saw nearly $1 billion flow into European defence startups in the first half of 2025 alone under the EU’s ReArm Europe plan, depends on the very rare earth supply chains that Beijing can restrict. Europe’s booming dual-use technology sector, exemplified by German drone makers reaching unicorn valuations on the strength of battlefield-tested products, relies on components that trace back through supply chains Beijing controls. The sanctions target China’s role in arming Russia. China’s retaliation targets Europe’s ability to arm itself.
The trap
The EU is caught in a structural contradiction. Its sanctions policy against Russia requires restricting Chinese entities that supply dual-use technology to the Russian military-industrial complex. Its defence policy requires rare earth magnets, critical minerals, and electronic components that China dominates. Its trade relationship with China, worth 759 billion euros in bilateral goods trade in 2025 with a 360 billion euro deficit in China’s favour, creates dependencies that limit the EU’s willingness to escalate. Ukraine’s emergence as a defence tech powerhouse, with an 800-fold increase in drone production since the invasion, demonstrates why cutting off Russian access to Chinese dual-use goods matters militarily. But every sanctions package that hits Chinese firms moves Beijing closer to a retaliatory threshold that could damage European industry more than it damages Russian supply chains.
The EU’s broader decoupling from China in sensitive technology areas, including blocking Chinese institutions from core Horizon Europe research grants in AI, semiconductors, quantum computing, and biotech, shows that the sanctions on Russia-linked Chinese firms are not isolated measures but part of a systematic rebalancing. The EU-China relationship has entered what European diplomats describe as a “do no harm” phase, which in practice means both sides are doing incremental harm while trying to avoid a rupture. The 20th sanctions package advanced that incremental process. The 21st, which Kallas has already announced, will advance it further. Beijing’s warning that the EU will “bear all consequences” is a statement about the trajectory, not the current moment. The consequences are cumulative. Each package adds designations. Each response adds export controls. Each round of retaliation narrows the space for the trade relationship that both sides publicly claim to value. The question is not whether the EU-China relationship can survive another sanctions package. It is how many packages it can absorb before the incremental damage becomes structural, and which side reaches that threshold first.
