EU-China Investment Deal Is Still Possible —But Not Before 2023, Analyst Says
Neil Thomas, China analyst at Eurasia Group, said it’s “more probable than not” that an investment pact between the European Union and China will be ratified. But both sides may wait until 2023 at the earliest to do so, Thomas added. The deal, called the Comprehensive Agreement on Investment, has been put on the back-burner following tensions between the EU and China.
Economies including the EU and the U.S. have long raised concerns about Beijing’s industrial practices that hinder foreign companies from competing fairly in China. Their complaints include Chinese state subsidies for state-owned enterprises and forced technology transfer from an overseas firm to its Chinese partner.
Thomas explained that the benefits of the EU-China investment deal include improved market access for European firms in China, as well as better rules on subsidies, state-owned enterprises and technology transfer.
But any ratification of the Comprehensive Agreement on Investment may not happen until 2023 at the earliest, said Thomas.
That’s partly because events such as Germany’s federal election in September and French President Emmanuel Macron’s reelection campaign in spring 2022 could affect sentiment toward the deal, said the analyst.
In addition, Chinese President Xi Jinping wouldn’t want to appear weak by giving in to the EU before the National Congress of the Chinese Communist Party in fall 2022, said Thomas. He explained that Xi is expected to secure his third term as general secretary of the CCP, so he’s unlikely to back down on Chinese sanctions on the EU.
China’s geopolitical footing
Beyond the economic benefits of the investment pact, China could lose some geopolitical footing if the deal isn’t eventually ratified, said Thomas.
The analyst added that China’s assertiveness on the global stage has “created space for closer EU-U.S. cooperation and has created more political will in the EU to get closer to the U.S.”
U.S. President Joe Biden has repeatedly stated his intent to work with allies in Europe and Asia-Pacific in countering China’s growing influence globally.
One of the first displays of such cooperation was seen in March when the U.S., EU, U.K. and Canada imposed sanctions on Chinese officials for alleged human rights abuses in China’s northwestern Xinjiang region. Beijing retaliated with its own sanctions against the four economies.
China also featured prominently on the agenda of the G-7 leaders’ summit and a meeting among NATO members.
Thomas pointed out that “China has not reacted well” to the statements coming out of those meetings. He said that from Beijing’s point of view, Biden’s approach to prioritizing alliances and forming coalitions against China could affect China’s economic development and ability to access high technology.
– CNBC