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BRUSSELS: The European Union and China agreed on Wednesday (December 30) an investment agreement that will give European companies greater access to Chinese markets and help repair what Europe sees as unbalanced economic ties.
The deal has been in the works for nearly seven years and is likely to take at least another year to take effect. It is part of a new relationship with China, which the EU sees as a systemic rival and partner.
READ: EU paves the way for investment pact with China
European companies will be allowed to operate in China in sectors including electric cars, private hospitals, real estate, advertising, maritime industry, telecommunications cloud services, airline reservation systems and ground handling. Some requirements that companies operate as part of joint ventures with Chinese partners will be removed.
Companies that could benefit include Daimler, BMW, Peugeot, Allianz and Siemens, all with a large presence in China.
China will prohibit the forced transfer of technology from foreign companies and has pledged to be more transparent about subsidies and prohibit state-owned companies from discriminating against foreign investors.
The agreement brings Europe a degree of parity with the United States, which has reached a phase 1 trade agreement with China. Jake Sullivan, chosen by President-elect Joe Biden as national security adviser, tweeted last week that the new US administration would welcome early consultations with Europe on China’s economic practices.
The agreement includes commitments on climate change and labor rights. The commitments are reciprocal, but the EU market is already much more open. Brussels has given up some ground on energy, but says its offer to China is primarily to ensure existing openness.
Belgium EU China
The agreement was reached after an online meeting between the heads of the EU institutions and Chinese President Xi Jinping. The deal, he said, showed China’s determination and confidence to open up.
It would stimulate the world economy as it recovers from the coronavirus pandemic and increase mutual trust, he added.
The President of the European Commission, Ursula von der Leyen, called the agreement an important milestone in the EU’s relationship with China.
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Hosuk Lee-Makiyama, director of the ECIPE trade think tank, said that while there were few obvious benefits for Beijing in the text, China would not have signed up without some promise of advantage.
“No major power, least of all China, gives anything for free, so there will be compensation. It’s just not in the deal,” he said.
Compared to a trade deal, which could include retaliatory tariffs, such an investment deal is also more difficult to enforce, Lee-Makiyama said, noting that the EU, for example, is unlikely to seize the assets. Chinese assets.
The EU has wanted to portray the agreement as a step towards the creation of multilateral rules. It does not yet cover topics such as trade flows or public procurement for companies like telecommunications equipment maker Huawei.
The bloc intends to promote laws that ensure greater reciprocity in public procurement and a stricter control of foreign subsidies.
