July 27th, 2026
Overview
This week, we discuss China's Export Ban on EU companies, XI Jinping's address at the World AI Conference, and Taiwan's Drone Infrastructure Development.
Trade
Dual-Use Duel: China Responds to EU sanctions with Export Ban on European Companies
By Contributor Henry Pandamadi
On the 24th of July, China’s Ministry of Commerce announced a decision to place 14 European entities on its export control list. These companies are responsible for the import and export of dual-use items. This measure bars major exporters in China from selling their items to these companies, effective immediately.
The Ministry of Commerce building in Central Beijing. (via the China Global Television Network)
Isn’t Everything Dual Use?: The term “dual use items” refers to goods, technology or software that have both a civilian and military usage. The European Parliament, in 2021, defined them as “designed for civilian use” but also recognised that “they [could] be misused”. This includes chemicals, drones, as well as certain rare earth materials. Dual goods are prevalent across various sectors, such as biotechnology, cybersecurity and aerospace. Various regional and international regulatory frameworks exist in order to limit the misappropriation and misuse of dual-use goods, with heavy fines being handed out for non-compliant companies. The placement of European enterprises on the Chinese export control list means that foreign companies are forbidden from exporting dual-use items of Chinese origin. Furthermore, Chinese exporters will need to apply for special permission in order to trade these items with the sanctioned companies.
Retaliation: This decision was announced to have been made in response to the 21st round of sanctions on Russia imposed by the European Union. According to the EU’s Press Release, this package of sanctions totals “218 individual listings”, with “48 individuals”, as well as “170 entities”. The sanctions range from financial services to energy exports to cryptocurrency assets. China was involved in this package because 51 new entities were subjected to tighter export control, due to their participation in the Russian Military Industrial Complex. The press release states that “some of these entities are located in third countries”, one of which is China, and specifies that they “contribute to Russia’s circumvention of export restrictions”. In response, 14 entities based in European Union countries were placed on the Chinese export control list. These include Italian electric motor manufacturer Lafert SpA, French drone company Cavok UAS and Czech vehicle manufacturer Tatra Trucks.
European Beef?: China’s export control list has most regularly been utilised against American and Japanese companies. For example, in June of this year, China placed 10 US-based firms on its export control list, after the United States had placed 80 Chinese companies on its “Entities Identified as Chinese Military Companies Operating in the United States” list. Furthermore, in the same month, Beijing placed 20 Japanese companies on its export control list for dual-use items, similarly to this new measure. As it seems, Europe will be a key battleground for competing visions of the new global order, with the Americans on one side and the Chinese on the other. As the European Union’s third largest trading partner, China does have considerable leverage over the EU, although the United States is the first largest trading partner with the Union.
Tech
Global Consensus: Xi Jinping at the World AI Conference
By Gazette Manager Praful Chennupati
On July 17th Xi Jinping delivered China's view on what the global governance of AI can look like.
Xi Jinping keynote address at the World Artificial Intelligence Conference in Shanghai July 17th. (Photo by CNA)
WAICO: On July 16, 2026, representatives from 29 countries, such as Russia, Cuba, and Brazil signed an agreement to participate in the World AI Cooperation Organization as founding members. WAICO will function as an intergovernmental body to develop international cooperation and global governance for artificial intelligence technologies. The following morning, CCP PM Xi Jinping delivered a keynote address at the 2026 World AI Conference. In this speech, he advocated for openness between nations in AI research and development, and called for developing a “consesus-based global governance framework”. He also warned against “a new historical injustice” in artificial intelligence, likely trying to highlight the potential for AI to affect the global economic divide in favor of wealthy nations.
AI Global Order: The CCP appears to be promoting what it frames as a more open and inclusive AI global order, though this claim faces skepticism from western analysts and governments alike, especially the USA. When questioned as to whether promotion of open source models is China’s way of creating a “trap”, CCP foreign ministry spokesman Lin Jian stated that the CCP opposed drawing ideological lines and imposing technological blockades. On July 24, US officials accused Chinese AI lab Moonshot of distilling(training data for one model on another more advanced model) its new model Kimi K3 from an Anthropic model. This signals an increase in tensions as Washington continues to weigh restricting Chinese open-source models like Deepseek, which currently make up nearly 60% of US corporate AI usage according to OpenRouter.
Defense
Protection & Polarization: Live-Fire Drills in the Taiwan Strait
By Newsletter Director Jason Holman
On July 23rd China began live-fire drills off the coast of Fujian. These come at a time that Taiwan is increasingly attempting to bolster its defense. However these attempts might fail to materialize due to increase political polarization.
Taipei News Conference on the Chinese drills in Taiwan Strait. (via. NYT)
Lessons of War: On July 23rd, following talks between US Secretary of State and Chinese Foreign Minister , China began two days of live-fire drills off the coast of Fujian. Taiwanese officials worry that these ‘Gray Zone” tactics could escalate into a full blockade or invasion by China. Taking lessons from the wars in Iran and Ukraine Taiwanese leaders have begun refocusing efforts around strengthening Taiwan's fuel reserves and drone manufacturing capabilities. However, this same week saw KMT and TPP politicians in Taiwan’s Executive Yuan push-back against DPP programs to invest in Taiwan's drone infrastructure.
Polarization: Taiwan’s political landscape is largely divided between the Kuomintang (KMT) and the Democratic Progressive Party (DPP). In 2024 DPP candidate Lai Ching-te won Taiwan’s presidential election. However 2024 also saw the KMT gain a narrow lead in Taiwan’s legislature, winning 52 seats to the DPP’s 51. Taiwanese politics is highly polarized between the KMT and DPP, and with upcoming elections in November tensions only continue to rise. A primary clash between the DPP and KMT is cross-strait relations. Generally, the KMT favors stronger relations with Mainland China, as seen by KMT Chairwoman Cheng Li-wun’s visit with Xi Jinping in April. Often Taiwanese drives for greater defensive capabilities, such as fuel reserves and drone manufacturing, can be seen as actions provoking China, a more sensitive issue for KMT politicians.
Defensive Capabilities: The KMT is currently rejecting Taiwan’s Ministry of Education’s proposed allocation of $19.25 million (USD) to help develop drone-operating talents across Taiwanese high schools and colleges. On July 22nd Taiwanese President Lai additionally pushed for a $6.6 billion attack drone development program for Taiwan, which has also faced KMT opposition. The wars in Ukraine and Iran have revealed the ways in which drones can be used in modern warfare, and Taiwan is not intent on falling behind. Currently Taiwan’s drone industry is robust, with Taiwan exporting 139,000 drones to Ukraine this year alone. However, 50% of Taiwan’s industry remains reliant on Chinese batteries. The lack of a shared view on the future of cross strait relations amongst Taiwan's political parties could prove to further hamper Taiwanese attempts to bolster defensive capacities.
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