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More deeply connected and closely forged China-EU economic ties in the works
By Wen Qing  ·  2021-01-08  ·   Source: NO.2 JANUARY 14, 2021
The 500th A320 family aircraft from Airbus' Final Assembly Line Asia in Tianjin, north China, is delivered to China Southern Airlines on October 29, 2020 (XINHUA)

On December 30, 2020, China and the EU wrapped up seven years of negotiations, resulting in the bilateral Comprehensive Agreement on Investment (CAI). A Happy New Year's gift for both sides.

The announcement was made during a meeting between Chinese President Xi Jinping and German Chancellor Angela Merkel, French President Emmanuel Macron, President of the European Council Charles Michel and President of the European Commission Ursula von der Leyen via video link.

The agreement will give companies from both sides more access to the other's market. "It is a comprehensive, balanced and advanced agreement based on high-level international finance and trade rules," Shi Zhiqin, a professor with the School of Social Sciences at Tsinghua University, said. "The pact will break down the barriers for bilateral investment, provide a stable and open business environment to unleash the fullest investment potential."

Mutual benefits

There lies a huge untapped potential for bilateral investment between China and the EU. Compared to the overall trade volume, it lags far behind.

In 2019, the EU became China's largest trading partner with bilateral trade reaching 559.6 billion euros ($630 billion). In the first nine months of 2020, their import-export volume amounted to 425.5 billion euros ($524.85 billion), according to Eurostat, the EU's statistics organization. China overtook the U.S. to become the EU's largest trading partner and the EU was China's second largest after the Association of Southeast Asian Nations.

However, in 2018, the EU's actual investment, $10.42 billion, accounted for only 7.7 percent of the foreign capital inflow into China. China, in turn, invested $8.11 billion in the bloc that same year.

Under the CAI, both China and the EU are committed to promoting investment liberalization and facilitation, Li Yongjie, Director General of the Department of Treaty and Law of the Ministry of Commerce, said at a press conference in Beijing on December 30, 2020.

The agreement covers areas far beyond traditional bilateral investment agreements, involving market access commitments, rules on fair competition, sustainable development and dispute settlement.

It opts for the management approach of pre-establishment national treatment plus a negative list for foreign investment when it comes to market access. Pre-establishment national treatment means affording foreign investors and their projects treatment no less favorable than that afforded to local businesses and their investment. A negative list specifies the investment areas off-limits to foreigners.

For the first time, China promises to introduce negative lists for all industries, including service and non-service sectors, to align with the negative list-based management system established in accordance with the Foreign Investment Law, Li said, adding that the EU also promises to grant China fairly high-level market access.

"The conclusion of the agreement shows China's willingness to share development opportunities and a booming domestic market with the rest of the world," Shen Yi, an associate professor at Fudan University in Shanghai, said. "Foreign companies' entry into the Chinese market will also contribute to the country's high-quality development, and deliver tangible benefits to improve the people's livelihood."

China and the EU will strive to facilitate the early signing of the agreement, which will enter into force after both parties complete their respective legal procedures, Li said.

Greater significance

Amid the coronavirus pandemic and global economic slowdown, the conclusion of the CAI negotiations is an important contribution of China and the EU to building an open world economy and upholding the multilateral trading system, Li Chenggang, Assistant Minister of Commerce, told Xinhua News Agency.

He said it will help stabilize global industrial and supply chains and promote global economic recovery.

China and the EU working together could refute the tide of anti-globalization and reinforce a free and open world economy, Shi said, adding that the CAI is also a central manifestation of the EU's pursuit of strategic autonomy and independence from the U.S.

Recently, the U.S. has escalated its containment of China, requiring the EU to "choose sides" on issues including 5G technology, international trade and global governance. But the EU chose to defend its own interests and basic principles and refuses to succumb to external pressures in the CAI negotiations, Shi said.

According to Shen, the wedge between the EU and the U.S. is that their relationship model doesn't fit for the call of the times. The transatlantic relations were strong when the U.S. provided security protection and economic opportunities for the EU. Yet today, the U.S. expects to preserve its ties with the EU in an international system dominated by its hegemony, which veers against the tide of the times.

"In fields such as the economy, finance, science and technology, investment and trade, China and the EU should create a new mechanism under which they can effectively manage differences through pragmatic negotiations," Shen said.

The CAI is clear proof that this new mechanism exceeds the agreement itself. 

(Print Edition Title: Bond Ambition)

CAI Negotiation Timeline

December 30, 2020: Chinese and European leaders announced the conclusion of negotiations as scheduled.

April 2019: The 21st China-EU leaders' meeting in Brussels, Belgium, pledged to achieve decisive progress necessary to conclude negotiations, more particularly those advancements regarding investment liberalization commitments.

July 2018: During the 20th China-EU leaders' meeting, the two sides exchanged their market access offers, agreeing to build an open, transparent, fair, and predictable business environment for potential investors.

July 2017: Positive progress was achieved on issues including transparency, domestic policies and special procedures in the 14th round of negotiations in Brussels.

November 30-December 4, 2015: Both sides made significant headway with the scope of issues under the agreement and arranged for the drafting of a joint text during the eighth round of negotiations in Brussels.

January 2014: The first round of negotiations took place in Beijing, China.

November 2013: Start of negotiations for a bilateral investment treaty was announced at the 16th China-EU leaders' meeting in Beijing.

(Source: Xinhua News Agency)

Copyedited by Elsbeth van Paridon

Comments to wenqing@bjreview.com

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