The European Union Chamber of Commerce in China called on China to make bold commitments to conclude the EU-China investment agreement by year end as the Chamber released its European Business in China – Position Paper 2020/2021. This annual publication delivers to the Chinese government over 800 detailed recommendations for improving the business environment, spread across 34 industry sectors and horizontal issues, the Chamber wrote in a press release. The Position Paper details how persistent issues, such as limited market access and a complex regulatory environment, prevent European businesses from contributing fully to China’s sustainable development. This significant amount of untapped market potential could help to not only boost economic growth, but also stave off serious problems that have for some time threatened China’s development, like its burgeoning debt situation and rapidly ageing population. While the European Chamber has been advocating for increased market access and a level playing field for its members for the past two decades, it is now critical for China to enact meaningful reforms due to the economic devastation wreaked by the Covid-19 pandemic and the looming threat of decoupling.

Although European companies remain committed to the market, a number of ‘dichotomies’ that have emerged in recent years raise questions over which direction China will eventually decide to move in:
• The ‘one economy, two systems’ model, which divides the private and state-owned economies
• The country’s economic potential versus its market access regime
• The persistent divide between China’s rhetoric and the reality on the ground
• The clash of China’s charm offensive towards European business and its ‘wolf warriors’ in Europe

These issues are further compounded by the increased politicization of doing business in China. This is a serious factor that threatens business operations in ways that companies can neither predict nor control. European leaders currently still have the appetite for engagement, but public opinion in the Old Continent is souring on China: voters are voicing their concerns over the unbalanced economic relationship, allegations of forced labor in Xinjiang and the autonomy of Hong Kong. These issues present a real challenge for the EU and China to find an effective way forward before the window of opportunity closes, according to the European Chamber.

It is therefore imperative that the EU and China strive for a political agreement on the Comprehensive Agreement on Investment (CAI) by the end of 2020. A half-baked deal that leaves the most critical issues unaddressed would be unwelcome and futile. Instead, it must deliver tangible results and secure open and fair markets on both sides to bolster the relationship and lay the groundwork for further productive engagement.

“Having inked bold economic agreements with numerous diverse partners in recent years, it is not revolutionary that the EU should expect a market that is as open and fair as its own when entering into such an agreement with China,” said Joerg Wuttke, President of the European Union Chamber of Commerce in China. “After more than 30 painful rounds of CAI negotiations, there’s a real sense that this is now or never,” the Chamber concluded in its press release. To download the report, click here.

In a Chinese reaction to the Position Paper, Bai Ming, Deputy Director of the International Market Research Institute at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times that “the EU has raised some issues about the Chinese market, but there are also obstacles in the EU that must be overcome.” Bai said that the difficult situation posed by the Covid-19 pandemic and rising global tensions requires “political wisdom” on both sides to turn this into an opportunity for cooperation rather than conflict. While the bilateral relationship faces many complications, and some EU countries and the EU Chamber have been more focused on the negatives, the overall relationship remains on a solid track because both sides need and support each other, Cui Hongjian, Director of EU Studies at the China Institute of International Studies, said.

Chinese companies are taking a less rosy view of doing business in the European Union compared with last year, as an index measuring the ease of doing business in the EU declined from 73 points in 2019 to 70 this year, according to a report by the Chinese Chamber of Commerce to the EU (CCCEU) and consultancy Roland Berger. Four months of in-depth interviews and surveys of Chinese executives were conducted across Europe. CCCEU Chairwoman Zhou Lihong said that as Covid-19 wreaks havoc on EU economies, most Chinese member companies and institutions have been struggling to weather the pandemic storm. “Adding to their woes is that Brussels and several member states continue to adopt a ‘conservative’ approach to foreign investment, security screening and foreign subsidies, among others, leading to ‘unprecedented’ uncertainties for Chinese companies and major concerns,” she said.

According to the report, the decline in favorable views centers on aspects of the political environment, macro-economic and sector-specific environments and the labor market. Overall, 68% of the respondents feel the EU has been tightening its China policy; 72% believe that the EU market outlook is worse than last year; and 55% experience more difficulties in hiring European and foreign talent. The survey also found that if the ease of doing business in the EU were to improve, 60% of Chinese companies in the EU would invest more in the market and nearly 20% intend to do so “significantly”, the China Daily reports.