What’s going on?

• The EU and China are close to reaching a business investment deal as Brussels (Belgium) seeks to flatten the playing field for European companies operating in the Chinese market.

For EU

• The talks are seen as a core part of EU’s strategy for managing increasingly tense trade relations with China.
• The pact is designed to remove barriers to investment in China such as:
  • JV requirements
  • caps on foreign equity in certain industries.
• Sectors set to be covered:
  • manufacturing,
  • financial services,
  • real estate,
  • environmental services,
  • construction, and
  • auxiliary services to support shipping and air transport.

For China

The deal is set to

• lock existing market-access rights
• while offering some investment possibilities in renewable energies.

Possible frictions

• The agreement is expected to cause frictions with the incoming US administration of Joe Biden.
  • the EU published a transatlantic strategy that urged the US to work with it to meet the “strategic challenge” posed by China.
  • The Biden team has stated that it will seek to build a multilateral alliance with the EU and other partners to put pressure on Beijing over practices (e.g: industrial subsidies & forced technology transfer) that have strained the global system of rules-based trade.
  • The deal is said to level the playing field with the US, which has secured some of the same benefits through its “Phase 1” trade deal with China.
• An agreement may also be contentious with rights activists, given allegations that China uses Uighur Muslims detained in Xinjiang as forced labor.

Content source: 
1.  Jim Brunsden , Michael Peel & Mehreen Khan. (2020) EU and China poised to agree investment pact. Financial Times. Available at: https://amp-ft-com.cdn.ampproject.org/c/s/amp.ft.com/content/097b44e6-c788-45d0-b85b-4302b99e553e [Accessed on December 29, 2020]