China and the European Union reached an understanding on hybrid vehicle trade, marking progress in negotiations as the bloc seeks to curb imports, though details of how it will be implemented remain unclear.

The understanding followed intensive consultations and complies with World Trade Organization (WTO) rules, China's Ministry of Commerce said in a statement released on Friday, without disclosing specific terms.

Chinese Commerce Minister Wang Wentao and EU Trade and Economic Security Commissioner Maros Sefcovic held 2 days of talks in Beijing on October 8 and 9.

Sefcovic said on social media platform X on Friday that the shared understanding includes halving China's exports of hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs) to the EU.

He also cited improved access to China's market for EU companies and further easing of rare earth export licensing, describing the progress as a "first step."

However, the post did not specify a baseline, implementation timetable or mechanism for halving exports. The statement released by China did not mention the scale of the reduction.

EU-CN trade needs real rebalancing. With Minister Wang Wentao we've reached a shared understanding to: 🔹halve HEV, PHEV exports 🔹improve access to China's market 🔹further ease rare earths export licensing.
A first step. I welcome the genuine engagement. We reconvene by Jan. https://t.co/SiKiZYLC8N

Before the understanding was reached, the EU had been considering using hybrid vehicles as a starting point for addressing its trade imbalance with China, raising the risk of a broader automotive trade dispute.

The Financial Times reported on September 17 that the EU was asking China to voluntarily limit hybrid vehicle exports to its market or potentially face higher tariffs.

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