Whats and whys of the EU-China investment agreement

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The European Union and China agreed an investment pact on Wednesday, which Brussels believes will help redress what it sees as imbalanced economic ties.

Here are the main points of the agreement and its timing.

WHY THE HURRY?

The EU and China had sought to conclude a deal by the end of the year and political leaders signed off on it with only a day spare.

The EU’s largest country Germany is a big proponent of the deal with many of its large companies operating in China and had set it as a goal to finish talks during its six month EU presidency, which ends on Dec. 31.

The deal has also been struck on the eve of president-elect Joe Biden taking office, with concerns over China likely to be a feature of EU-U.S. relations. Some observers speculate this might have persuaded Beijing to move.

MARKET ACCESS

The EU secures new access for its firms to invest in China in air transport, such as computer reservation systems and ground handling, telecom cloud services, electric cars as well as private hospitals without joint venture requirements.

The deal also covers financial services, environmental services, international maritime transport, advertising, real estate and construction.

Companies that could benefit include Volkswagen, BMW, Allianz, Siemens and Peugeot .

China receives some concessions in manufacturing and in the energy sector, in retail and wholesale but not trading platforms.

Brussels see the agreement though mainly as redressing imbalances, with its offer to China essentially a guarantee of continued access for Chinese firms – access that could be revoked in the case of a dispute.

LEVEL PLAYING FIELD

China has agreed to several commitments demanded by the EU to ensure a level playing field.

These include ensuring state-owned enterprises do not discriminate against EU investors when they buy services. Forced technology transfer, a condition in a number of joint ventures, will be banned.

China has also pledged to be more transparent on subsidies, including in services.

EXTRA COMMITMENTS

The agreement includes commitments on climate change, such as adherence to the Paris climate agreement, and on labour rights. China is, for example, to sign up to more International Labour Organization conventions, notably on forced labour.

ENFORCEMENT

A political committee is designed to ensure the agreement is honoured, with arbitration panels to rule on disputes, leading to potential sanctions.

A panel of experts will draw up a report, with input from civil society, to ensure these ecological and labour commitments are met.

WHAT NEXT?

The text of the agreement still needs to be finalised, before months of legal scrubbing and then translations to ensure it is in the 24 official EU languages. Only then will it be ratified, which in Europe requires approval from the 27 EU governments and by the European Parliament.



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