China and the European Union announced a long-awaited investment deal confirmed by Chinese president Xi Jinping and European Commission president Ursula von der Leyen, media reported on Wednesday.
The Comprehensive Agreement on Investment (CAI) was agreed in principle and was “most ambitious outcomes that China has ever agreed with a third country”, Valdis Dombrovskis, EU trade commissioner told FT in a statement.
“We expect European businesses will have more certainty and predictability for their operations. We have some very welcome changes to the rules of the game, because for a long period, trade and investment relations with China have been unbalanced,” he said.
The news comes amid accusations from the outgoing Trump administration on alleged human rights abuses in China's Xinjiang Uyghur Autonomous Region (XUAR), with tensions set to continue under President-Elect Joe Biden in January.
Beijing has repeatedly and routinely slammed the accusations as false.
A New Deal in EU-Chinese Relations
The deal is set to remove barriers to EU companies investing in the mainland, namely in joint ventures and caps on foreign equity, according to an EU press statement.
Industries such as automotive, private healthcare, airport transport services and computing would be secured, Dombrovskis told FT, adding it would boost cooperation on electric vehicles and hybrid motors.
Core concerns in EU-China trade talks included transparency on subsidies and protection from forced intellectual property and technology transfers, as well as non-discrimination guarantees compared with state-owned enterprises.
All matters were resolved in the talks, allowing Beijing to lock in market access rights and boost its manufacturing and renewable energy industries, FT added
— Ursula von der Leyen (@vonderleyen) December 30, 2020
President Ursula von der Leyen tweeted the EU needed to "engage" China and "not just talk to them from a distance".
The deal would uphold EU interests and promote the bloc's core values and provide a "lever to eradicate forced labour. The agreement would also help both sides reach Paris Agreement targets and promote "rule-based multilateralism", she wrote.
Tensions with Incoming Biden Administration
The administration would “welcome early consultations with our European partners on our common concerns about China’s economic practices”, Jake Sullivan, Biden's national security advisor choice, tweeted last week.
— Jake Sullivan (@jakejsullivan) December 22, 2020
But Tom Wright, senior fellow at the Washington-based think tank Brookings, slammed the deal as "mind-boggling".
“It’s just mind-boggling that the EU would even consider rushing to agree an investment pact with Beijing weeks before Biden takes office after claiming for several years that they wanted transatlantic cooperation on China,” he said.
But Dombrovskis vowed the EU would "engage very closely with [the] US" on trade issues. EU officials raised the concerns to secure commitments from Beijing to ratify and implement International Labour Organisation (ILO) rules.
The deal is set to be ratified by both sides and is expected to take effect in early 2022, EU official said.
EU-UK Post-Brexit Deal
The news comes days after the EU and UK agreed on a post-Brexit trade deal on Christmas Eve, just days ahead of the 31 December transition deadline, with EU chiefs signing the deal at the European Council in Brussels.
The deal will need to be approved by EU member-states and ratified both by the European parliament and Westminster.
The British Prime Minister addressed Commons on Wednesday and is expected to provide further updates in the afternoon.