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REGIONSASIA-PACIFIC


NEW DEAL AIMS TO REMEDY IMBALANCE, BUT SOME OBSERVERS REMAIN SCEPTICAL


‘Breakthrough’ EU-Chinadeal


Aninvestment agreement signed by China and theEU in the last days of 2020 has been hailed by both sides as a significant breakthrough, but observers are concerned about its possibility to ensure a more reciprocal EU–China economic relationship. The deal, officially called the


“Comprehensive Agreement on Investment” (CAI), has been seven years in the making with 35 rounds of negotiations. It will replace the 25 bilateral investment treaties that China signed with individual EU countries. The EuropeanCommission said


in a statement posted on December 30 that the CAI “will be the most ambitious agreement that China has ever concluded with a third country”, adding that it will provide European investors better access to China’s 1.4 billion consumer market. Cumulative foreign direct


investment (FDI) flows from the EU to China over the past twenty years have


reached more than €140bn, while €120bn worth of Chinese FDI has flown to the EU, according to figures cited by the European Commission. The CAI aims to ensure European


companies can “compete on a better level playing field” in China. The bloc’s two largest host countries of Chinese investment and contracts, Germany and France, pushed through the deal with consent from other member states. Notable examples of such investments are Geely Auto’s 2018 decision to buy a $9bn stake in Germany’s Daimler, and China Investment Corp’s $3.2bn stake in France’s GDF Suez. In terms of greenfield investment,


European companies have been far more active in China than their Chinese counterparts in the EU. Figures from investment


monitor fDi Markets indicate that European companies have announced more than 4700 greenfield projects in China since 2003, compared with 1817 Chinese company projects in the EU.


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Not everyone is convinced of the deal’s potential However, the annual number of


greenfield projects announced between the EU and China has been converging, as Chinese companies have become increasingly active as overseas greenfield investors. Nonetheless, EU-based companies have announced more projects in China than the reverse every year since records began, according to fDi Markets. Despite some optimism about the


CAI, critics have focused their attention on issues in China—such as intellectual property theft, lack of reciprocal market access, use of forced labour, abuse of state subsidies and compulsory joint ventures—and question the extent to which the deal will redress any of these. While full details of the


agreement are yet to become publicly available, experts are wary that the dealmay not provide as much access to the Chinese market as European companiesmay be hoping. Derek Scissors, a Chinese


economy expert and author of the China Global Investment Tracker, says that the overarching issue is “China under Xi [Jinping] will never allowsubstantial competition with centrally-controlled state-owned enterprises or in newly labelled ‘strategic’ sectors”. ALEXIRWIN-HUNT&SETHO’FARRELL


China outlines new FDI rules


China’s National Development and ReformCommission (NDRC) has announced new details for foreign investment screening on the basis of national security, amid rising scrutiny of cross border deals worldwide. The 23 articles in the ‘National


Security Review’ (NSR), published on December 19, cover investments in sectors ranging from defence and technology to infrastructure, transport and financial services. This follows the US’s decision to


add a string of Chinese companies, including state-owned semiconductor giant SMIC, to a trade blacklist on December 18, as the Trump administration continues to focus its attention on the chip industry. China’snewregulations come


alongside efforts to open up the Chinese economy to foreign investment, withtheNDRCstressing in a statement that this is “not protectionism”nor is it “retrogression in opening up”. The measures are to be officially implemented within 30 days of the announcement.■ ALEXIRWIN-HUNT&SETHO’FARRELL


UKapplies tojoinCPTPP


The UK has formally applied to join theComprehensive and Progressive Agreement for Trans- Pacific Partnership (CPTPP), in its latest bid to forge newpost-Brexit trade relations. The free trade agreement covers 11


countries in the Asia-Pacific region, includingAustralia, Chile, Japan, Singapore and Vietnam, representing 13%of globalGDPand more than 500 million people. Since Vietnam became the last country to bring CPTPP into force in January 2019, the value of foreign investment within the bloc amounted to $45.1bn, according to investment monitor fDi Markets. UK international trade secretary


Liz Truss said that joining the CPTPP will create “enormous opportunities for UK businesses that simply weren’t there as part of the EU, and deepen our ties with some of the fastest- growing markets in the world”.■ ALEXIRWIN-HUNT


www.fDiIntelligence.com February/March 2021


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THENUMBEROFBILATERALINVESTMENT TREATIESTHATCHINASIGNEDWITH INDIVIDUALEUCOUNTRIES


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