EU and Chinese leaders set to give blessing to investment accord

BRUSSELS (BLOOMBERG) – European Union and Chinese leaders are poised to announce a hard-fought agreement to expand opportunities in China for foreign investors.

European Commission chief Ursula von der Leyen and Charles Michel, who chairs the bloc’s summits, plan to speak with Chinese President Xi Jinping in a video conference on Wednesday (Dec 30) to signal the successful completion of negotiations begun in 2013 on an EU-China investment pact, according to officials in Brussels.

Chancellor Angela Merkel of Germany, which currently holds the EU’s six-month rotating presidency, will also join the discussion, two of the officials said. The video conference is due to start at 1pm Central European Time (8pm Singapore time), Michel said in a Twitter post on Tuesday (Dec 29).

The deal aims primarily to expand access to the Chinese market for foreign investors in industries ranging from cars to telecommunications. The accord also tackles underlying Chinese policies deemed by Europe and the US to be market-distorting: industrial subsidies, state control of enterprises and forced technology transfers.

“We need to rebalance the economic and investment relationship with China,” Valdis Dombrovskis, executive vice-president in charge of economic matters at the commission, the EU’s executive arm, told Bloomberg Television on Dec 18.

“Currently Europe is substantially more open to Chinese investments than China is to the EU’s investments.”

The planned announcement on Wednesday will represent a high-level political blessing to the investment agreement, which will also cover environmental sustainability.

Both sides plan to put the finishing touches on it over the coming months.

The accord will then need the approval of the European Parliament, where some voices have expressed objections as a result of alleged human-rights violations in China.

The deal includes Chinese pledges on labour standards meant to address such concerns, including in relation to ratification of related United Nations-backed conventions, according to EU officials, who asked not to be identified because of the continuing preparations.

The incoming US administration of President-elect Joe Biden has also signalled reservations, at least about the timing of the agreement.

Jake Sullivan, national security adviser to Biden, on Dec 22 urged “early consultations with our European partners on our common concerns about China’s economic practices”.

The EU says its deal with China will help to foster the renewal of transatlantic cooperation, which has been shaken over the past four years by the “America First” agenda of outgoing President Donald Trump.

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Following are some of the Chinese concessions to European investors in the agreement, according to an EU official:

Chinese market opening: improved access across industries including air-transport services, where joint-venture requirements for computer-reservation systems are being removed, and new opportunities in sectors including clean vehicles, cloud services, financial services and health;

Chinese state-owned enterprises: non-discrimination commitment when state owned enterprises are buyers of services;

Chinese subsidies: enhanced transparency, notably for services;

Chinese forced technology transfers: prohibited.

While the accord largely commits the EU to maintain its relative openness to Chinese investors, according to the European official, the deal offers greater access for them to the bloc’s energy wholesale and retail markets (but excluding trading platforms), renewable-energy markets (with a 5 per cent cap at the level of EU countries and a reciprocity mechanism).

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