Bond Ambition

By Wen Qing

On December 30， 2020， China and the EU wrapped up seven years of negotiations， resulting in the bilateral Comprehensive Agreement on Investment （CAI）. A Happy New Years gift for both sides.

The announcement was made during a meeting between Chinese President Xi Jinping and German Chancellor Angela Merkel， French President Emmanuel Macron， President of the European Council Charles Michel and President of the European Commission Ursula von der Leyen via video link.

The agreement will give companies from both sides more access to the others market. “It is a comprehensive， balanced and advanced agreement based on high-level international finance and trade rules，”Shi Zhiqin， a professor with the School of Social Sciences at Tsinghua University， said. “The pact will break down the barriers for bilateral investment， provide a stable and open business environment to unleash the fullest investment potential.”

Mutual benefits

There lies a huge untapped potential for bilateral investment between China and the EU. Compared to the overall trade volume， it lags far behind.

In 2019， the EU became Chinas largest trading partner with bilateral trade reaching 559.6 billion euros （$630 billion）. In the first nine months of 2020， their import-export volume amounted to 425.5 billion euros （$524.85 billion）， according to Eurostat， the EUs statistics organization. China overtook the U.S. to become the EUs largest trading partner and the EU was Chinas second largest after the Association of Southeast Asian Nations.

However， in 2018， the EUs actual investment，$10.42 billion， accounted for only 7.7 percent of the foreign capital inflow into China. China， in turn， invested $8.11 billion in the bloc that same year.

Under the CAI， both China and the EU are committed to promoting investment liberalization and facilitation， Li Yongjie， Director General of the Department of Treaty and Law of the Ministry of Commerce， said at a press conference in Beijing on December 30， 2020.

The agreement covers areas far beyond traditional bilateral investment agreements， involving market access commitments， rules on fair competition， sustainable development and dispute settlement.

It opts for the management approach of preestablishment national treatment plus a negative list for foreign investment when it comes to market access. Pre-establishment national treatment means affording foreign investors and their projects treatment no less favorable than that afforded to local businesses and their investment. A negative list specifies the investment areas off-limits to foreigners.

For the first time， China promises to introduce negative lists for all industries， including service and non-service sectors， to align with the negative list-based management system established in accordance with the Foreign Investment Law， Li said， adding that the EU also promises to grant China fairly high-level market access.

“The conclusion of the agreement shows Chinas willingness to share development opportunities and a booming domestic market with the rest of the world，” Shen Yi， an associate professor at Fudan University in Shanghai， said. “Foreign companies entry into the Chinese market will also contribute to the countrys high-quality development， and deliver tangible benefits to improve the peoples livelihood.”

China and the EU will strive to facilitate the early signing of the agreement， which will enter into force after both parties complete their respective legal procedures， Li said.

Greater significance

Amid the coronavirus pandemic and global economic slowdown， the conclusion of the CAI negotiations is an important contribution of China and the EU to building an open world economy and upholding the multilateral trading system， Li Chenggang， Assistant Minister of Commerce， told Xinhua News Agency.

He said it will help stabilize global industrial and supply chains and promote global economic recovery.

China and the EU working together could refute the tide of anti-globalization and reinforce a free and open world economy， Shi said， adding that the CAI is also a central manifestation of the EUs pursuit of strategic autonomy and independence from the U.S.

Recently， the U.S. has escalated its containment of China， requiring the EU to “choose sides”on issues including 5G technology， international trade and global governance. But the EU chose to defend its own interests and basic principles and refuses to succumb to external pressures in the CAI negotiations， Shi said.

According to Shen， the wedge between the EU and the U.S. is that their relationship model doesnt fit for the call of the times. The transatlantic relations were strong when the U.S. provided security protection and economic opportunities for the EU. Yet today， the U.S. expects to preserve its ties with the EU in an international system dominated by its hegemony， which veers against the tide of the times.

“In fields such as the economy， finance， science and technology， investment and trade， China and the EU should create a new mechanism under which they can effectively manage differences through pragmatic negotiations，” Shen said.

The CAI is clear proof that this new mechanism exceeds the agreement itself. BR