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China-EU Comprehensive Agreement on Investment May Not Be Concluded in 2020, EU Top Trade Official Says

The 26th round of negotiations for a Comprehensive Agreement on Investment (CAI) between the European Union and mainland China will be held in Brussels on 16 - 17 and 20 - 21 January 2020. Hong Kong’s business community may recall that from 16 to 19 December 2019, the 25th round of negotiations had already taken place in Brussels. During that round, both mainland China and the EU exchanged market access offers for the second time, after having previously exchanged market access offers in July 2018 at the 20th China-EU Summit which was held in Beijing. While the European Commission has expressed that it will evaluate mainland China’s latest offers carefully, it has warned that the CAI may not be concluded by the end of 2020 given what are perceived as mainland China’s restrictive market access policies.

Comprehensive Agreement on Investment

At the 14th China-EU Summit in February 2012, mainland China and the EU agreed on their commitment to launch negotiations for an EU-China Comprehensive Agreement on Investment, as reconfirmed at the 15th China-EU Summit in September 2012. The ongoing negotiations for the CAI between the parties were launched in 2013, and the first round of talks took place in January 2014.

The aim of the CAI is to provide investors on both sides with predictable, long-term access to the EU and Chinese markets, as well as to protect investors and their investments. The CAI, once its provisions are agreed, will not only signify a traditional investment protection agreement. The CAI is to include market access provisions for the pre-entry phase as well to ensure that foreign investors have the same market access as domestic investors.

In January 2016, mainland China and the EU agreed on the comprehensive scope of the CAI and agreed that the investment treaty should improve market access opportunities for their investors by establishing a genuine right to invest and by guaranteeing that they will not discriminate against their respective companies.

The European Commission expressed that it seeks an opening of key sectors, such as telecommunications, information and communication technology, health, financial services, and manufacturing. According to the European Commission, the financial services sector is a sector in which the lack of reciprocity is among the most acute.

Additionally, the CAI is to include specific obligations on, among others, transparency, non-discrimination, industrial subsidies, as well as a prohibition of performance requirements which include those leading to technology transfers, fairness and predictability in authorisation procedures. The CAI also involves rules on environmental and labour-related aspects of foreign investment.

State of play

On 9 April 2019, the EU and mainland China committed to building their economic relationship on openness, non-discrimination and fair competition, ensuring a level playing field, transparency, and mutual benefits. Both sides were to achieve substantial progress in 2019, including on liberalisation commitments, in order to conclude the CAI in 2020.

Discussions have advanced in the meantime on specific disciplines related to financial services, capital movements and national treatment-related commitments, while substantial progress was made on state-to-state dispute settlement. Other discussions concerned investment liberalisation, disciplines ensuring a level playing field and sustainable development. Detailed exchanges took place on state-owned enterprises (SOEs), transfers and capital movements, entry and temporary stay of key personnel, state-to-state dispute settlement and sustainable development. The negotiation rounds also had dedicated sessions on transparency, including on standard-setting procedures, competition-related issues, including on procedural fairness in competition proceedings, SOEs, financial services, health, transport, transfers and capital movements.

During the 23rd negotiation round in September 2019, in-depth negotiations were held on the basis of the first offers exchanged in July 2018, with a view to identifying the next steps in that regard. During the 24th round of CAI negotiations which was held in Beijing last November, the chief negotiators from mainland China and the EU confirmed their commitment to advance internal processes with a view to exchanging revised market access offers before the end of 2019. These revised market access offers were exchanged during the 25th round of negotiations in the week of 16 December 2019.

On 6 December 2019, the new EU Trade Commissioner Phil Logan stated during an event in Ireland that the CAI would be concluded by the end of 2020. However, MLex reported on 17 December 2019 that Sabine Weyand, a senior EU trade official, said at an event organised by the European Policy Centre in Brussels that a conclusion of the CAI in 2020 is a “tall order” as things stand. The European Commission’s director-general for trade stated that mainland China and the EU are moving at a “snail’s pace”, and that the talks need “more political commitment on the Chinese side”.

Free trade agreement

On 16 December 2019, Wang Yi, mainland China’s foreign affairs minister, called for the launch of an early start on free trade agreement negotiations between mainland China and the EU, or at least for the launch of a feasibility study for such agreement. That process would have to start in parallel with the ongoing CAI negotiations.

MLex reported on 17 December 2019 that the EU wants better investment conditions for EU companies as a precondition for the start of free trade agreement talks.

Content provided by Picture: HKTDC Research
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