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Jun 30, 2021

The cumulative EU foreign direct investment (FDI) flows from the EU to China over the last 20 years have reached more than €140 billion. For Chinese FDI into the EU the figure is almost €120 billion. EU FDI in China remains relatively modest with respect to the size and the potential of the Chinese economy.

Regarding investment, the EU-China Comprehensive Agreement on Investment (CAI) will be the most ambitious agreement that China has ever concluded with a third country. In addition to rules against the forced transfer of technologies, a common practice for entering the Chinese market, CAI will also be the first agreement to deliver on obligations for the behavior of state-owned enterprises, comprehensive transparency rules for subsidies and commitments related to sustainable development.

Key elements of the EU-China Agreement on Investment

The CAI will ensure that EU investors achieve better access to a fast growing 1.4 billion-consumer market, and that they compete on a better level playing field in China. These new market access openings are promised by commitments such as the elimination of quantitative restrictions, equity caps or joint venture requirements in a number of sectors.

Further examples of market access commitment by China include:

  • Manufacturing: China has made comprehensive commitments with only very limited exclusions (in particular, in sectors with significant overcapacity). In terms of the level of ambition, this would match the EU's openness.
  • Automotive sector: China has agreed to remove and phase out joint venture requirements. China will commit market access for new energy vehicles.
  • Financial services: China had already started the process of gradually liberalizing the financial services sector and will grant and commit to keep that opening to EU investors. Joint venture requirements and foreign equity caps have been removed for banking, trading in securities and insurance (including reinsurance) and asset management.

Many more sectors have been relieved of Chinese restrictions, such as the health industry, R&D, Telecommunication, Environmental services, business services, construction and computer services.

The agreement will be monitored and enforced by a state-to-state mechanism.
Ecat Venture team