China and EU conclude investment agreement

Out-Law News | 07 Jan 2021 | 5:44 am | 1 min. read

China and the European Union (EU) have completed negotiations for a comprehensive agreement on investment (CAI), giving companies in each area wider investment access in the other area.

China has become the biggest trade partner of the EU and the EU is China’s second biggest trade partner. Firms in China and Europe will benefit from much wider investment access and better protection in their markets. The deal will lock in China’s existing market access rights while securing some openings in the areas of manufacturing and renewable energy.

This deal follows a call between Chinese president Xi Jinping and European Commission president Urusla von der Leyen, European Council president Charles Michel, French president Emmanuel Macron and German chancellor Angela Merkel on behalf of the Presidency of the EU Council.

China made commitments to give a greater level of market access for EU investment in manufacturing and services such as cloud services, financial services, private healthcare, environmental services, international maritime transport and air transport-related services. European firms will get authorisations and complete administrative procedures more easily than before. The agreement secures access to China's standard setting bodies for European firms.

The agreement will provide a fair market climate for EU investors with clear rules on Chinese State-owned enterprises (SOEs), transparency in subsidies, prohibition of forced technology transfer and other distortions.

China and EU will establish a values-based investment relationship under sustainable development principles.

China is undertaking commitments on labour rights and the environment and has agreed to implement the Paris Agreement on climate change and to implement the International Labour Organisation Conventions (ILO).

The two parties signed the China-EU agreement on geographical indications in September 2020 and planned to establish a China-EU High Level Environment and Climate Dialogue and a China-EU High Level Digital Cooperation Dialogue, Xinhua net said.

The deal is planned to complete negotiations on investment protection and investment dispute settlement within two years of the signature of the CAI, which will replace current bilateral investment treaties signed between China and EU member states.

Corporate law expert Wei Liu of Pinsent Masons, the firm behind Out-Law, said: “The investment agreement will definitely promote mutual investments from China to Europe and from Europe to China. A more open Chinese market means a lot of new opportunities for European investors. For example the ability to own 100% in a car manufacturing company in China would put European OEMs at a level playing field with Chinese OEMs. At the same time this would also encourage Chinese OEMs to enhance their technology development to be able to compete with international players.”

“On the other hand, a lot of Chinese investors were previously worried about increased level of scrutiny on Chinese investments into Europe due to newly-issued national security regulations, now the new Investment Agreement would give them a lot confidence in restarting their investments in Europe once COVID situation is improved,” he said.