​EU-China Investment Agreement: What companies need to know

Just in time, only one day before Germany would have ended its presidency of the Council of the European Union, China and the EU reached an agreement in principle on investments.

It was very much now or never, as it was perceived that the EU would only reach consensus with China over an investment deal with German Chancellor Merkel at the helm. 

The negotiations for the Comprehensive Agreement on Investment (CAI) were seven years in the making, and after the positive news of 30 December 2020, show that the EU is trying to conduct its own business with China, despite the pressures from the  US.

As the Gross Domestic Product produced by the EU countries and denominated in Euro is the nr. 1 in the world on the day of the agreement in principle, this is a positive development for China.

The CAI, once finally approved and ratified, will now decide the next few years of relationships between the EU and China. In other words, stronger ties, or further decoupling.

Is there an agreement?

Wait a minute, I just mentioned ‘once approved and ratified’, does that mean there is no agreement yet? That is procedurally correct. 

The negotiations have been successfully concluded and there is an agreement in principle. However, this mean that both sides will need to finalize the legal text of the agreement, which is not finalized and published yet. 

Also, let us not forget that the CAI will need to be approved by the EU Council and the European Parliament. In other words, the agreement is not done yet.

Positive news and changes

However, let us remain focused on the good news, the important points of the CAI have been communicated. The agreement in principle will open-up the Chinese economy further for European companies. At the same time, the EU will keep the door open for Chinese investments in the EU.

Some of the key points are the following:

• Creating Level playing field for European companies in China. In the following sector the Chinese economy will be opened-up further: manufacturing, cloud services, financial services, private healthcare, environmental services, international maritime transport and air transport-related services.

• There will be rules on the prohibition of forced technology transfer, as this remains a key concern for European companies doing business in China.

• The obligation of setting up a joint venture in the automobile sector will be eliminated. As such car companies, many German ones in Europe, will be able to finally set up their own operations in China.

• There will be behavior regulations for Chinese State-Owned Enterprises as to make sure the competition with European companies is fair and square.

Next steps

As mentioned, the legal text is not out yet. Once the text is out, we will further publish an article regarding the real consequences for companies. 

For now the EU statement can be found here: EU-China Comprehensive Agreement on Investment.

We will keep you updated. Happy new year!