Flashback to the controversial EU-China investment deal that sealed 2020

Introduction


On the 30th of Decemeber 2020, the 27 countries of the European Union and China finalized an agreement to allow to their counterpart a better access for investments in their respective markets.

Although there was no official text or press conference to seal this historic agreement, a videoconference brought together Chinese President Xi Jin Ping and the representatives of the European Union: the President of the European Commission Ursula von der Leyen, the President of the European Council Charles Michel as well as the German Chancellor Angela Merkel and the French President Emmanuel Macron.

Seven long years of negotiations have taken before the proposal for cooperation to be shaped. The official signature and possible ratification of this agreement is expected to take two more years, as the proposal has to be amended and approved by the European Parliament and must also be approved by the Chinese counterparts.

Two businessmen shaking hands in front of flags of European Union and China by Marco Verch under the license (CC BY 2.0)


The EU-China relationship in numbers:


Today, China is the EU's second largest trading partner behind the US, accounting for 20.2% of EU imports of goods and 10.5% of EU exports. While European investments in China amount to 150 billion euros (since the early 2000s), Chinese investments in the EU amount approximately to 115 billion euros.


What are the proposals put forward by this agreement?


Hailed by Ursula von der Leyen as a prospect for cooperation that "will offer European investors unprecedented access to the Chinese market", this agreement aims to rebalance market conditions between the two world powers, which are currently considered asymmetrical. Indeed, the European market today seems fully open to Chinese companies. China, on the other hand, not only has closed entire sectors to foreign investment, but is also subsidizing Chinese state-owned enterprises in sectors that are open to European investment, giving them a competitive advantage.

Thus, regarding the European Union’s perspective, not only should this agreement reinforce the transparency of subsidies given to Chinese companies, but it should also guarantee the respect for intellectual property: it would prohibit forced technology transfers in the automobile and financial sectors, a principle according to which, once on the Chinese territory, a European company must join forces with a local company in the form of a joint venture, and thus share its data.

Furthermore, China would open up sectors previously inaccessible to European investment, such as healthcare (only in cities with more than 10 million inhabitants) and the Cloud. Moreover, this agreement should make it easier for the EU to invest in the construction and advertising sector, and the sector of hybrid and electric cars.


Electric car charging at a charging station. Blurry tram in the background by Ivan Radic under the license (CC BY 2.0)


Finally, China "commits (...) to work in the perspective of the ratification of the International Labor Organization (ILO) fundamental conventions, including those [prohibiting] forced labor," affirmed the European statement. For the first time, China is also making commitments on sustainable development with the aim to implement the Paris Climate Agreement.


China, for its part, will have greater access to the European market, particularly in the energy and manufacturing sectors. Indeed, China will have the opportunity to invest in renewable energy within the European Union up to 5% of the market share of each member state.


Who mainly benefits from the deal? Who suffers from this decision?


Germany, which has largely contributed to the conclusion of this agreement, seems to beits main beneficiary, and in particular its automobile sector should profit from it. Indeed, Daimler, Mercedes and Volkswagen firms already make higher profits in China than in the United States. Thus, the opening up of the Chinese market for hybrid and electric vehicles offers a more promising prospect for the German automobile industry.


In a triangular dimension with the United States, this agreement is above all part of China's desire to position itself as a major commercial partner with the European Union. Sanctioned by the United States under the Trump administration on several occasions, China has shown itself to be open to European investment and aims to extend its project to reconfigure the commercial networks on a global scale, over which the United States has control.

Indeed, in the past years, China has heavily invested and today mainly controls the European ports of Piraeus in Athens, Bilbao and Valencia. Several European companies have also been bought by Chinese investors, such as Volvo in Sweden, Pirelli in Italy and Club Med and Lanvin in France.

Thus, this agreement, which was concluded before the inauguration of American President Joe Biden (which took place on January 20), seems to find its purpose in slowing down any future cooperation project between the United States and the European Union.


Pixabay


Conclusion


In order to ensure the proper implementation of this agreement, a summit bringing together important political leaders will take place "at least once a year", according to an official in charge of the negotiations.

Despite the historical dimension of this agreement,