China and the EU are rushing to meet a year-end deadline to seal a long-awaited investment deal, in a sign of the bloc’s push to build strategic ties with Beijing, even as it revives relations with the US.
The likelihood of the accord being settled soon is rising despite the disruption caused by the coronavirus crisis, officials from both sides have told the Financial Times. A shift by Beijing in the important area of market access has given the process additional momentum, EU officials said.
The EU has long yearned for an agreement to allow its companies wider entry to the Chinese market, and the two sides agreed last year that it should be concluded by the end of 2020. Securing a deal would be a diplomatic coup for both powers. It would come weeks before the inauguration of US president-elect Joe Biden, which has the potential to foster improved transatlantic trade ties after tensions with the Trump administration.
“The talks are now in the final stage,” Zhang Ming, China’s ambassador to the EU, said in an interview with the FT. “Both sides are working towards the objective of finishing the talks by the end of this year.”
Mr Zhang said the two powers had reached a consensus on so-called level playing field provisions and were focused on outstanding questions such as market access and sustainable development. He pointed to Chinese president Xi Jinping’s repeated public commitments to striking a deal.
“It’s quite unusual for a Chinese head of state to give such . . . attention to an agreement under negotiation,” Mr Zhang said. “This expresses China’s political commitment to expand the opening up and promoting China-EU co-operation.” He concluded: “So, fingers crossed.”
People close to the talks said the agreement would boost market access for European companies by enshrining sector-by-sector commitments to remove or reduce barriers such as joint venture requirements and investment bans. Sectors set to be covered by the deal include manufacturing, financial services, real estate, construction and auxiliary services to support shipping and air transport.
EU diplomats said that the European Commission had called a meeting of national officials for Thursday afternoon to make sure capitals are happy with the deal that is emerging.
This follows a breakthrough in recent days when Beijing made more generous market access offers for various sectors of the economy, saying it could accept some of the EU’s outstanding demands regarding reciprocal treatment of its companies, European officials said.
“Progress has been achieved in a number of areas,” said a commission spokesperson. “There are still some important outstanding matters and talks are continuing this week.
“The EU remains committed to the end-of-year deadline for conclusion of the negotiations, provided we have a deal worth having. We will not put speed over substance.”
Diplomats said unresolved subjects included an EU push — strongly backed by many of the bloc’s governments — for China to commit to honouring international agreements on labour rights. China has also made a request for limited access to the EU’s renewable energy market.
The prospective deal is a central piece of the bloc’s broader three-pronged strategy on China, which it has branded an “economic competitor” and “systemic rival” as well as a partner in some areas.
China’s goals in the talks include guaranteeing rights to invest in parts of the EU economy, notably the energy sector, notwithstanding Europe’s increasing sensitivity about foreign ownership.
Unlike the US, which has sought to force China to make trade concessions through punitive tariffs, Brussels has prioritised negotiation and reform of the World Trade Organization to adapt it to Beijing’s economic model.
“There seems to be a window of opportunity on the investment agreement,” said one senior EU diplomat. “We will see what happens in the next days.”