China and the EU have concluded negotiations for the bilateral investment treaty (BIT) – also known as the Comprehensive Agreement on Investment (CAI) – as  planned before the end of the year 2020. Chinese President Xi Jinping held a video-conference on December 30 with German Chancellor Angela Merkel, French President Emmanuel Macron, President of the European Council Charles Michel and EU Commission President Ursula von der Leyen. Xi stressed during the video conference that the “balanced, high-level, and mutually beneficial” pact demonstrates China’s determination and confidence to open up on a higher level, and it will provide broader market access, a better business environment, stronger institutional guarantees and brighter prospects for bilateral cooperation. The BIT will push post-Covid-19 global economic recovery, promote global trade, investment liberalization and facilitation, enhance the international community’s confidence in economic globalization and free trade so as to contribute to China and the EU’s efforts to build an open global economy, Xi said. Xi vowed that China and the EU would join hands together in 2021. The pact shows to the world that even if China and EU have differences on some issues, both sides have the political willingness to enhance dialogue, deepen cooperation and share the benefits based on mutual respect, he said.

Follow-up work start immediately, including making the legal text of the agreement available for signing, accelerating internal approval processes and promoting the entry into force of the agreement. The talks on the CAI kicked off in late 2013, with 35 rounds of official negotiations having been held, including 10 rounds in 2020, which marked the 45^th anniversary of the establishment of diplomatic relations between China and the EU. Progress of the negotiations was closely monitored by a working group headed by Chinese Vice Premier Liu He and Valdis Dombrovskis, Executive Vice President of the European Commission.

President Xi Jinping put forward five proposals related to the agreement, namely coordinating efforts to fight against pandemics, jointly promoting recovery of the economy, connecting development strategies, promoting green development, and pushing forward multilateral cooperation. The CAI covers far more areas than traditional bilateral investment treaties, including market access commitments, fair competition rules, sustainable development and dispute settlement. Both China and the EU have made “high-level and reciprocal” market access commitments, and all the rules are “applied both ways,” China’s Ministry of Commerce (MOFCOM) noted.

Chinese companies will receive binding commitments of access to the EU market under the agreement, while China will open up its financial, manufacturing and services sectors to the 27-nation bloc, said Li Yongsha, Deputy Director of MOFCOM’s Department of Treaty and Law. Although the European investment market is relatively open, through the agreement the EU provides Chinese companies with legally binding market-access commitments, she added. Consensus was reached on issues such as energy, state-owned enterprises (SOEs), transparency of subsidies, technology transfer, standards setting, administrative enforcement and financial regulation, Li said, adding that the agreement also made provisions on environmental issues.

The China Daily quoted Jochum Haakma, Chairman of EU-China Business Association (EUCBA), as saying that the Association is very happy that a decision to conclude the negotiations has been taken, and of course details will need to be hammered out in coming months and ratified by the European Parliament. Based on the negotiations, European companies active in industries including financial services, telecommunications services and new energy vehicles (NEVs) would see new opportunities in China, he said. It will be of great importance and a big step for the bilateral relationship and shows the political willingness of both parties to continue to sit down together and to try to solve problems and misunderstandings on the basis of reciprocity and a level playing field, he added.

The European Union Chamber of Commerce in China said it “welcomes the news that a political agreement has been reached. The business community looks forward to parsing through the details and what they mean for solidifying the legal position of European companies already in China, as well as for those that may be new entrants to the market as a result of the agreement. Of course, the agreement will not come into force until final texts are developed and then ratified by both sides, which will likely require overcoming additional hurdles. The European Chamber hopes to see that decision-makers maintain the same spirit of engagement that carried the day for the political agreement so that they can deliver an enforceable pact.” “We eagerly await the release of the details of this political agreement, and hope to find a robust and bold conclusion,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “A strong agreement would be a powerful statement to show that constructive engagement can produce results.” Trade relations between China and the EU have developed fast in recent years, but bilateral investment has lagged seriously behind, with investment to and from Europe only accounting for a tiny proportion of the two sides’ overall foreign investment. 

The number of China-Europe freight trains increased by 50% in 2020 to 12,400 trains, according to the China State Railway Group (China Railway). It was the first year the number of trains exceeded 10,000 since their launch in 2011, marking resilient bilateral trade in hard times, the Global Times comments. The number of containers delivered by the China-Europe freight trains reached 1.13 million, up 56% year-on-year.