EU – China Comprehensive Agreement on Investment

After seven years of negotiations, last December 30 the European Union and China reached a political agreement on the bilateral Comprehensive Agreement on Investment, which sets the general guidelines for European investments in China and Chinese investments in Europe, with the aim of improving the conditions of access to the two markets for both parties.

Restrictions for European (and foreign) companies investing in China have always been numerous: forced transfer of technology, obligation to create joint ventures with Chinese companies, competition from state-owned companies living on public subsidies. The understanding reached is expected to remove many of these restrictions on European companies that want to start or expand their business in China in certain sectors, including electric cars, healthcare equipment, chemicals, financial services, construction and IT.

The Comprehensive Agreement on Investment assumes a particular strategic importance since in 2020 China has become the first trade partner of the European Union, surpassing the USA. According to data released by Eurostat, in the first nine months of the year, China increased its exports to the Old Continent by 4.5%, reaching 280.7 billion euros. In the same period the value of products ‘made in Europe’ sold in China has remained unchanged compared to the previous year, standing at 144.8 billion.

The EU Trade Commissioner, Valdis Dombrovskis, defines the achievement of the EU-China agreement as “the most ambitious result on market access, level playing field and sustainable development that China has ever agreed with a third country, a result that should not be underestimated and that comes after 7 years of discussions”. The Agreement, says Chinese leader Xi Jinping, “demonstrates China’s confidence and determination in developing greater external openness”, and gives the possibility to achieve “greater market access, a better safeguard system” and “a bright future of cooperation”.

The guidelines on which an understanding was reached are as follows:

  • Remove for EU investors to the Chinese market any quantitative restrictions, equity limits or joint venture requirements;
  • Increase the transparency of the regulatory environment, predictability and legal certainty of the investment environment (with respect to the Chinese market, allowing EU investors to have access to information that affects their business, but also giving them the opportunity to comment on relevant laws and regulations, as well as ensuring clear, fair and transparent procedures);
  • Establish safeguards regarding the treatment of European investors in China and Chinese investors in Europe, including protection against unfair and inequitable treatment, unlawful discrimination, and unimpeded transfer of capital and investment-related payments;
  • Ensure a level playing field by, among other things, pursuing non-discrimination as a general principle;
  • Enable effective enforcement of commitments through investment dispute resolution mechanisms available to contracting parties and investors.

Among the issues that could have been an obstacle to the understanding was that of forced labor. In this regard, the EU stated that China was committed to implementing the United Nations International Labor Organization (ILO) conventions that it has already ratified and working toward ratification of its core conventions including those on human rights. Nonetheless, European leaders reiterated their concerns regarding the issue of human rights in China, including the situation in Hong Kong.

On the basis of these guidelines, the final text of the Agreement will have to be finalized and approved by the European Parliament. After that, it will be up to the parliaments of the 27 member states to debate and ratify it.

Luca Condoleo