China's carrot-and-stick with EU trading partners start to pay off

BEIJING, Sept 14 (Reuters): Beijing, as a vote on EU duties on China-made electric vehicles looms, employed a carrot-and-stick approach to deal with the 27-strong bloc, threatening trade retaliation while cajoling key EU states into one-on-one talks on deals and investments.

The potential blow of counter-tariffs on EU goods will fall mostly on states such as Spain, France and Italy that have voiced support for the EV duties, with pork, dairy and brandy exports to the world's second-biggest economy at stake.

European Union members such as Germany, Finland and Sweden that have not pushed for the tariffs would feel less impact, with little exposure to the export items singled out by China.

China's tactics appear to be working.

Spanish Prime Minister Pedro Sanchez wrapped up a China visit this week by sitting in a Chinese EV and saying it was an "honour". He then unexpectedly urged the EU to reconsider its position. According to a Spanish government source, Sanchez's delegation came away feeling "Spain is more important now", and that an agreement over tariffs on its pork products was close.

As a sweetener, a Chinese company agreed to build a $1 billion plant in Spain to make machinery used for hydrogen production, in apparent backing for Spain's green ambitions.