The EU and China are set to announce a long awaited investment treaty. This will open up significant corporate opportunities on both sides. Not quite there, and ratification is required by EU governments and the European Parliament, but signs are positive that the treaty will be completed.
The Agreement will increase investment in China as China removes barriers to joint venture investment and caps on foreign equity. There will be transparency on subsidies, rules against forced technology transfer and guarantees of non-discrimination which have in the past protected China’s state owned enterprises. The Agreement will level the playing field with China re issues of investment and market access.
The EU will be pleased with the outcome having complained that the talks were making too little progress.
China, too, will welcome the extension of commercial links with the EU.
There is a significant political background on both sides that require comment – see later posts today.
The significance of the new China-EU agreement is two fold. In this post I focus on China.
China is on a journey from being a modest agriculturally based economy up to the 1970’s to being the largest economy in the world in 2035.
China has been on a path of change from high walled protectionism to mature participation in world trade. The journey had to be step by step – never too fast, never too slow. Opening up was always on the agenda – it was a question of developing and preparing China to take its role in international economic and political affairs.
Critics have always “got it wrong” – belittling China at every juncture. but China has “got it right” – open up to the world of investment and development only when internally you can handle the change. Like the long distance runner, pace is everything.
There is much more to come – but only as China acquires the experience and expertise to handle change – and with the Party always in control.
The EU has been in a tussle with the USA. It never approved of Trump’s belligerent attitude to China, preferring, instead, to find a way forward.
But problems will remain under Biden who cannot make overtures to China without being accused by Trump and the Republicans of being “soft on China.” Comments by Jake Sullivan, a senior in the Trump team, make that clear.
But the EU does not want to turn its back on Chia because EU business does not want to turn its back on China. So there are problems going forward.
Yes, there will always be political differences between China and the EU. China calls itself a Socialist State with Chinese Characteristics and the EU is composed of some of the most advanced Capitalist countries. And yet, the differences notwithstanding, there are two stand out points;-
1. EU business wants more, and not less, business, trade and investment with China.
2. EU diplomats know that China is the key to the rest of this century. Better to be involved than “de-coupled”.