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EU and China Complete Comprehensive Investment Agreement

The European Union and China agreed to the EU-China Comprehensive Agreement on Investment (CAI) on December 30, 2020. A call between Chinese President Xi Jinping and top European dignitaries (including EU Commission president Ursula von der Leyen, German Chancellor Angela Merkel, and French President Emmanuel Macron) on the penultimate day of 2020 signalled the end of seven years and 35 rounds of treaty negotiations, although the agreement still needs to be ratified and formally adopted – likely not until early 2022

The CAI stands to replace the mix of existing investment agreements between EU member states (except for Ireland) and China, providing increased Chinese market access (in areas such as manufacturing and key service industries) to European firms. The agreement also addresses issues and lays down “very clear rules” related to the regulation of SOEs, subsidies, and forced technology transfers in China. A December 31, 2020, South China Morning Post report, however, notes that many observers are underwhelmed by the deal – as it “retains multiple deep carve-outs to protect Chinese interests in key sectors, including automotive, aviation, health care and telecoms, according to an early negotiating text, and contains some commitments that Beijing has made in previous agreements and in its own existing policies.” 

China emerges from the negotiations with deeper investment ties with the EU, a fact that may, according to experts, help “insulate it[self] from America’s efforts to exclude it from global trade and investment.” The Financial Times reports that “Beijing views the agreement as a strategic breakthrough…  after Joe Biden’s incoming administration registered concern over the pact in recent weeks.” The agreement comes at an opportune time for China. Having previously reported unparalleled economic recovery in the latter half of 2020 and signing a landmark trade agreement by way of RCEP, the CAI is certainly another at least symbolic economic achievement for the country. 

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