By Melissa Cox
Your commercial awareness dose
Earlier this week on Wednesday, an investment deal between China and the EU was confirmed by China’s President Xi Jinping and EU leaders. Although the deal is yet to be approved by the European Parliament, this agreement ends negotiations that have been ongoing since 2013. For the EU, the deal will make it easier for EU businesses to operate in China as well as making investments easier.
For China, they will have improved market access rights within industries such as renewable energy, as well as a smoother process for Chinese investors interested in EU businesses. The following sectors will be among those more accessible between the EU and China: electric cars, private healthcare, real estate, advertising, maritime industry, and telecom cloud services.
Businesses from the EU will be able to operate much easier in China, as requirements such as partnerships with local firms in joint ventures will no longer be a requirement to establish themselves in China. China will also ban forced transfers of technology from foreign companies, as well as making sure foreign investors are not discriminated against. There will also be an effort made to ensure that Chinese SOEs (State Owned Enterprises) investing in the EU will not face discrimination.
Arguably one of the biggest takeaways for China from this deal is simply good diplomacy, as they acquired the deal just before US President-elect Joe Biden is to be sworn in later this month. Biden has made it clear that he wishes for a transatlantic co-operation that will pressure China into confronting issues such as human rights violations as well as certain business practices. Jake Sullivan, Joe Biden’s national security advisor stated on Twitter earlier this month that the US wishes for, “early consultations with our European partners on our common concerns about China’s economic practices.”
It has been pointed out that the agreement of this deal between the EU and China shows the EU’s current focus on economic advancements and opportunities in China, as they are doing so despite the criticism China is currently facing regarding human rights violations, such as the treatment of Uyghur Muslims in the Xinjiang region. This could be due to the poor state of the global economy as a result of the coronavirus pandemic, and as China’s economy is among one of the only that grew in 2020, the EU is looking for help.
As the investment deal between the EU and China has caused unrest in the US over their plans for a transatlantic co-operation to handle China, this could cause uncertainty over US-EU relations as the Biden administration takes over later this month. This would be advantageous to China as they would be able to continue as is, as the EU and US would be too preoccupied with their own relations. Some have questioned whether China was eager to finalize the investment deal before the Biden administration took over.
Xi Jinping stated that he believes the deal will allow for bigger markets for both the EU and China when it comes to investing. He also stated that he wishes for China to help stimulate the global economy again after the devastation of the coronavirus pandemic took its toll throughout 2020. There is no doubt, however, that this deal has given China an advantage over the US before Biden has even been sworn in.
Some economists have expressed doubts that this deal will really mean any significant changes. China recently adjusted its review system for foreign investments and will be able to reject future EU investors case-by-case if they wish to do so. Similar changes have been made to the same review systems in other EU countries, so it will go both ways, causing some to suspect despite the deal there will not be any major impact when it comes to investments.
Despite the scepticism, it is undeniable that with this deal, if passed by the European Parliament, will allow for more freedom for EU and Chinese investors after coming into action next year. It will also be interesting to see how the Biden administration will handle their plans of a transatlantic alliance to handle issues within China as Biden has been planning to do.
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