EU-China comprehensive agreement on investment: A game-changer to superpower game

EU and China announced the accomplishment of a long-awaited EU-China Comprehensive Agreement on Investment (EU-China CAI) on December 30 2020, in a move to open up more investment opportunities between the two economies.

Key points

• EU-China CAI will guarantee an unprecedented level of access to EU investors in China, allow EU companies to buy or establish new companies in key sectors, help level the playing field for EU companies in China and commit China to rules on state owned enterprises and transparency in subsidies.
• There are two main categories: market access commitments by China and commitments on fair competition.
• Economically, the meanings of the EU-China CAI are multi-faceted, from alleviating China-US tensions to constructing an EU-China reciprocity investment relation, from prompting China’s domestic structural reform and opening-up policy to stimulating bilateral economic growth.
• Some caveats are still noteworthy: First, the agreement may create frictions with the incoming US Biden administration, which has emphasized the multilateralism for rallying with the traditional transatlantic allies to put pressure on China; Second, regarding the scope of the EU-China CAI, it only covers a subset of a possibly future free trade deal between the two sides. Third, the true success of the EU-China CAI hinges on the implementation.

The most prevailing global economic news recently is the EU and China announced the accomplishment of a longawaited EU-China Comprehensive Agreement on Investment (EU-China CAI) on December 30th 2020, in a move to open up more investment opportunities between two economies. The draft was officially confirmed by European Commission president Ursula von der Leyen, President of Council of the European Union Charles Yves Jean Ghislaine Michel, and the Chinese president Xi Jinping on December 30th ’s video conference, a moment that would finally bring seven years long-haul to a successful close. In the final stage, the accord needs to be ratified by the European parliament, a process that may not begin until the second half of 2021. Actually, the China-EU negotiations on the bilateral investment treaty started early in November of 2013. Till now, both sides have already gone through 35 rounds of arduous negations on the contents. In July 2018, amid the trade war between China and the US, the China-EU summit was seeking for the acceleration of the negotiations of the agreement and put it as the first priority in the bilateral cooperation. Recently, in 2019, several factors indeed speeded up the process: the EU side wanted the deal to be done before the end of 2020 amid the pandemic raging and economic stumble; while from China’s side, amid the lingering and unsettled China-US hardship, in the countdown to the inauguration of Joe Biden as new US president, China is pulling out the stops and offering concessions, catching the deadline to achieve a successful accomplishment. In a general sense, the EU-China CAI will guarantee an unprecedented level of access to EU investors in China, allow EU companies to buy or establish new companies in key sectors, help level the playing field for EU companies in China and commit China to rules on state owned enterprises and transparency in subsidies. The necessary substantive commitments from China had been achieved on the three key pillars of the negotiations: market access, level playing field and sustainable development. The negotiated result is the most ambitious outcome that China has ever agreed with a third country or economy. 

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