Czech Business Today

During the last days of 2020, the EU and China managed to reach the political goal set earlier and concluded the negotiations of a Comprehensive Agreement on Investment (CAI). Although the reactions to the conclusion of CAI varied, it is an important agreement, mainly because of the commitments promised by the Chinese government that should help rebalance the relationship.

First of all, China has committed to improve market access for companies and investors from the EU and has opened several new areas as well, especially in the field of manufacturing, which is strategic for China. EU companies already have a strong manufacturing presence in China, especially in sectors like automotive and production of basic materials. Apart from that, China promised to make other sectors more accessible for European companies as well, including financial services, cloud services, private healthcare, transport related services and environmental services. CAI should improve the level playing field for European investors and increase predictability and certainty on the market. 

Secondly, the agreement is important, because it binds China to respect sustainable development principles and it’s the first time China actually agreed to include these provisions in an agreement with a trade partner. For example, China will undertake commitments in the areas of labour and environment, promote responsible business conduct, pursue the ratification of fundamental International Labour Organization (ILO) conventions on forced labour among others, implement the Paris Agreement and not lower the standards of labour and environmental protection in order to attract investment. Apart from that, both sides agreed to further cooperate on setting up a state-to-state dispute resolution system. The implementation of the agreement should be overseen at the highest levels, meaning by the Executive Vice President of the European Commission and the Chinese Vice President.

As for European businesses, the agreement is an important step towards rebalancing the relationship between the EU and China, but it’s a first one of many. It is clear to companies that the agreement will not change the business environment in China overnight. However, every endeavour leading to improvement of the conditions on the market is welcomed. Further increase of legal certainty and investor protection is crucial for European businesses; therefore the EU should continue to push China to create a dispute resolution mechanism as soon as possible.