EU-China conclude investment negotiations to allow greater market access

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The EU and China expect greater access to each other’s markets following the signing of the trade deal. Picture: iStock
The EU and China expect greater access to each other’s markets following the signing of the trade deal. Picture: iStock

BUSINESS


The European Union (EU) and China concluded negotiations for a Comprehensive Agreement on Investment on Wednesday.

The agreement will give each region’s businesses greater access to the other’s market.

The meeting was a follow up on the 22nd EU-China Summit held in June.

The Comprehensive Agreement on Investment will ensure that EU investors achieve better access to a fast growing 1.4 billion consumer market, and that they compete on a better level playing field in China.

According to the EU, this is important for the global competitiveness and the future growth of EU industries.

China committed to give a greater level of market access for EU investors including some new important market openings and commitments such as the elimination of quantitative restrictions, equity caps or joint venture requirements in a number of sectors.

The agreement will rebalance our economic relationship with China.
EU President Ursula von der Leyen

China also committed to ensuring fair treatment for EU companies to improve fair competition between EU countries and China.

The negotiations included agreeing on an even playing field in China, including in terms of disciplines for state-owned enterprises, transparency of subsidies and rules against the forced transfer of technologies.

China also agreed to provisions on sustainable development, including commitments on forced labour and the ratification of the relevant ILO fundamental Conventions.

The deal followed a call between Chinese President Xi Jinping and European Commission President Ursula von der Leyen, European Council President Charles Michel and German Chancellor Angela Merkel on behalf of the Presidency of the EU Council, as well as French President Emmanuel Macron.

Read: What does US-CHINA decoupling mean for emerging markets?

According to the EU, the agreement will create a better balance in the EU-China trade relationship.

Eurostat data shows that in 2019 the EU had exported goods worth approximately €198 billion (US$242 billion) to China and imported goods worth €362 billion (US$442 billion) from China, with a bilateral trade worth some US$650 billion last year, according to Bloomberg.

The cumulative EU foreign direct investment (FDI) flows from the EU to China over the last 20 years have reached more than €140 billion. For Chinese FDI into the EU the figure is almost €120 billion. EU FDI in China remains relatively modest with respect to the size and the potential of the Chinese economy.

This deal will give European businesses a major boost in one of the world’s biggest and fastest growing markets, helping them to operate and compete in China.
EU executive vice-president and commissioner for trade, Valdis Dombrovskis

However, Chinese foreign direct investment in the EU has continued to decline, mirroring the decline in Chinese outbound investments globally.

The Comprehensive Agreement on Investment’s main objectives would be an enhanced protection of EU investments in China and vice versa, improved legal certainty regarding the treatment of EU investors in China, reduction of barriers to investing in China, and as a result, increasing bilateral investment flows and improved access to the Chinese market.

Access to market commitments by China include manufacturing, the automotive sector, financial services, health and biological resources.

In a statement released by the EU, EU President Ursula von der Leyen said: “The agreement will rebalance our economic relationship with China.

Today’s agreement is an important landmark in our relationship with China and for our values-based trade agenda.

“It will provide unprecedented access to the Chinese market for European investors, enabling our businesses to grow and create jobs.”

EU Executive Vice-President and Commissioner for Trade, Valdis Dombrovskis, said: “This deal will give European businesses a major boost in one of the world’s biggest and fastest growing markets, helping them to operate and compete in China.”

The Chinese side reinforced that the two parties agreed on that list of contentious issues – all of which have been raised previously by the US.

The US and China have been locked in a trade war for more than two years, with the dispute spilling into technology, finance and beyond.


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