From October 8th to 9th, 2026, the second regular meeting of the China-EU Trade and Investment Consultation Mechanism was held in Beijing. 16 consensus lists were implemented. For the industrial control industry, especially in the sub-sector of magnetic grating encoders, this consultation did not bring about simple "benefits" or "disadvantages", but rather a structural stratification: the certainty of the upstream raw material supply chain is increasing, the rules and barriers for market access in the middle stage have not been removed, and the window for domestic substitution in the downstream sector remains open. Overall, the net impact is positive, but the positive effect is limited.



Let's start with the upstream. One of the most directly relevant items in the consensus list to the magnetic grating encoder industry is that China is willing to continue providing convenience for the approval of export licenses for rare earth and permanent magnets to Europe through the "green channel" mechanism. One of the core raw materials for magnetic grating encoders and Hall sensors is precisely the rare earth permanent magnetic material. Previously, the actual review period for rare earth export licenses often exceeded 60 to 120 days, and "no rejection" was often just an indefinite postponement. Once the green channel mechanism is implemented, the predictability of delivery to Europe will reach a new level. However, the deeper meaning of this consensus goes beyond just export convenience. The anxiety of the EU industry regarding rare earth supply is real. Shevchovich himself positions this achievement as "significantly alleviating the pressure on raw material supply for key European industries". This precisely confirms a structural fact: The magnetic sensor industry chain with rare earth permanent magnets as the core material has a natural strategic depth in terms of raw material supply. This cannot be changed by short-term competitive patterns and cannot be easily replaced by bargaining chips. For enterprises like Tianxian Digital Intelligence and Magzhi Intelligent, stable upstream supply means that their production planning can be more从容， and it also means that when facing downstream customers， "delivery certainty" itself becomes a quantifiable competitive advantage.

Let's look at the midstream. Article 8 of the consensus clearly states that both parties agree to conduct technical dialogues regarding the EU Foreign Subsidy Regulation (FSR). Since the FSR came into effect in 2023, its enforcement has been far more stringent than expected. As of May 2026, there were over 2,100 reports in the public procurement sector, far exceeding the estimated 30 per year originally planned. Chinese enterprises are the main targets of FSR investigations, including CRRC, Shanghai Electric, Tongfang Vision, and Goldwind Technology, among others. However, "technical dialogue" does not mean "rule relaxation" - it means the uncertainty of the rules is decreasing, but the rules themselves still exist, and even are tightening. The export of industrial control components and automation equipment to Europe faces compliance thresholds not only related to product performance, but also including whether CE certification is closed-loop, whether EMC can be replicated at the customer site, whether RoHS/REACH documents can be provided at any time, and whether the responsibility entity is clear. For magnetic grating encoder enterprises, as encoders are integrated components rather than end devices, the probability of triggering FSR public procurement declarations directly is lower than that of complete machine manufacturers, and the risk transmission is more like "the customer is blocked, and the order is affected as a result". But one thing must be clear: the dialogue is a window, not an exemption.

Back to the domestic industrial control market. In the second quarter of 2026, the revenue of the industrial control industry increased by 18% year-on-year. The continuous high growth of industries such as lithium batteries, semiconductors, and electronics has driven the acceleration of the sector's revenue growth. The increase in prices of raw materials and bulk commodities has squeezed the profit margin, but the data of contract liabilities and inventory shows that there are abundant orders in hand. A more direct signal for the magnetic sensor sub-sector is that Chinese manufacturers are moving from "replacing imports" to "entering the global forefront". The industrial market is the second-largest application market for magnetic sensors, with a CAGR of approximately 6%. Human-shaped robots are becoming a new growth sector. The downstream application fields of magnetic grating encoders - linear motor modules, industrial robots, semiconductor equipment, machine tools, etc. - are all on this growth curve. The downstream transmission brought by the China-EU consultations is more achieved through the prosperity of the domestic industrial control market: the capital expenditure rhythms of lithium batteries, semiconductors, and new energy sources do not suddenly brake due to the China-EU trade friction, and the encoder demand follows the equipment shipment volume. And the logic of domestic substitution becomes clearer during this window period.

Of course, the positive impacts have their boundaries. There are several things that are worth doing seriously. First, incorporate "supply chain certainty" into the product narrative. The green channel for rare earth permanent magnets is a signal, but what is more worthy of emphasis is that when imported brands may experience unstable deliveries due to external environmental fluctuations, domestic leading encoder enterprises provide certainty in delivery. This is not just a slogan but a verifiable capability - over a decade of accumulated production lines, localized supply chains, and rapid response capabilities. Second, prepare for compliance with European exports in advance rather than waiting until later. If an enterprise or a customer has business with Europe, make the technical documents for CE/EMC/RoHS/REACH "ready to be presented at any time". A common phrase among European customers and distributors is "Can you send me a copy of the RoHS and REACH declarations?" Not being able to present them is not a product issue but a process issue, but customers won't distinguish. Third, upgrade the narrative of "domestic substitution" from "substitution" to "supply". When the shipment volume of China's magnetic sensors has reached the forefront of the global market, the domestic leading enterprises no longer merely offer "alternative options", but a non-replaceable supply node in the global industrial chain. The concerns of the EU side regarding rare earth supply in the China-EU consultations precisely confirm this - the stability of China's supply chain is becoming one of the prerequisite conditions for the operation of the global industrial system.

The rules are changing, and certainty has become the most scarce product. For the magnetic grating encoder industry, the China-EU consultations do not lead to a simple conclusion of "exporting to Europe becomes easier", but rather a clearer strategic coordinate: there is depth in the upstream, a threshold in the middle, and a window in the downstream. Whoever can make certainty in the supply chain, compliance certainty, and delivery certainty part of the product can stand in a more favorable position during this window period.