Source: Securities Times Network

The person in charge of the Department of Law and Law of the Ministry of Commerce said that the China-EU Investment Agreement is a balanced, high-level and mutually beneficial agreement, which benchmarks international high-level economic and trade rules and focuses on institutional openness.

The balance is mainly reflected in: first, the two sides pay great attention to retaining the necessary regulatory power while making an open commitment; Second, the two sides not only pay attention to promoting bilateral investment cooperation, but also emphasize that investment should be conducive to sustainable development.

The high level is mainly reflected in the fact that both sides are committed to promoting investment liberalization and facilitation and have achieved high-level negotiation results. The agreement covers far more areas than traditional bilateral investment agreements, and the negotiation results cover four aspects: market access commitments, fair competition rules, sustainable development and dispute settlement.

Mutual benefit and win-win are mainly reflected in the fact that both sides have made high-level and mutually beneficial market access commitments, and all rules are applicable in both directions, which will create a level playing field for enterprises and benefit enterprises from China and Europe and even global enterprises.

What benefits will it bring to enterprises of both sides?

The agreement focuses on institutional openness. High-level market access commitments will bring more investment opportunities to enterprises of both sides. High-level fair competition rules will provide a better business environment for bilateral investment.

In terms of market access, the agreement adopts the pre-entry national treatment plus negative list model. For the first time, China has made commitments in the form of negative lists in all industries, including service and non-service industries, so as to fully connect with the foreign investment negative list management system established by the Foreign Investment Law. The European side also promised me a higher level of market access in the agreement.

In addition, market access restrictions that do not discriminate against foreign investment in themselves but have a significant impact on the establishment and operation of enterprises, The two sides will also promise not to impose restrictions on the number, output, turnover, directors and senior management, local research and development, export performance, headquarters setting, etc. of enterprises in most economic fields, and allow foreign exchange transfer related to investment and personnel entry and residence suspension.

In terms of fair competition rules, the two sides, based on creating a business environment ruled by law, reached consensus on issues closely related to enterprise operations, such as state-owned enterprises, subsidy transparency, technology transfer, standard setting, administrative law enforcement and financial supervision.

The agreement also include sustainable development issues

China has always attached importance to sustainable development, including environmental protection and protection of workers' rights and interests, and practiced the new development concept and people-centered development thought. The fundamental purpose of development is to satisfy people's yearning for a better life. At the same time, we have noticed that the inclusion of environmental protection and labor issues related to economy and trade has become an important feature of international economic and trade agreements in recent years. Based on the above considerations, the agreement makes special provisions on investment-related environmental and labor issues. The two sides will promote investment conducive to the realization of sustainable development goals, handle the relationship between attracting investment and protecting the environment and workers' rights and interests, and abide by relevant international commitments.

When will the agreement come into effect?

The spokesman said that in the next step, the two sides will carry out text review and translation, and strive to promote the early signing of the agreement. Thereafter, the Agreement will enter into force after both parties have completed their internal ratification procedures.

Organization: Good for these areas

China-EU Bilateral Investment Agreement (BIT), also known as China-EU Comprehensive Investment Agreement (CAI), aims to construct China-EU bilateral investment institutional arrangements. Negotiations on the agreement were officially launched in 2013 and have gone through 35 rounds of negotiations so far.

Soochow Securities pointed out that the agreement will help open up investment space for both sides. In 2019, China's exports to the EU amounted to US $427.8 billion, but direct investment accounted for only 2.5% of the trade volume. With the conclusion of negotiations and the entry into force of the agreement, the investment between China and Europe will open up the situation.

In the fields of new energy, environmental protection and digitalization, Chinese enterprises are expected to benefit. In the EU budget framework for 2021-2027 and the"Next Generation EU" fund plan, besides fighting epidemic and supporting economic recovery, promoting digitalization and green investment is the biggest investment area. The strong competitiveness of enterprises in related fields in China is expected to benefit further after the agreement is reached.

Western Securities believes that the China-EU Comprehensive Investment Agreement will boost market confidence and benefit related investment fields. 1) Most notably, China may agree to open its markets to EU companies in a number of areas, including manufacturing, financial services, real estate, construction and ancillary services to support maritime and air transport. In return, China won the EU's agreement to open up investment in renewable energy to China. It is beneficial to the new energy sector and will bring incremental markets for the export and investment of China's photovoltaic and wind power enterprises. 2) Six main sectors benefiting from reduced barriers and restrictions to investment: transport equipment, mining and energy extraction, chemicals, food and beverage manufacturing, finance and insurance, communications and electronic equipment. 3) Benefit from the expansion of foreign direct investment: EU direct investment in China is mainly concentrated in China's automobile industry, consumer goods and services, pharmaceutical and biological industries, and basic materials industries. China's direct investment in EU industries is mainly concentrated in new energy sectors, real estate and hotel industries, and electronics.

China-EU Comprehensive Investment Agreement is good for China-EU trade and promotes China's export growth. In 2019, the EU is China's largest export partner and second largest import partner. The total trade volume between China and EU is 705.3 billion US dollars, accounting for 15.4% of China's total foreign trade volume. China's trade surplus with the EU is US $152.1 billion (1.05 trillion yuan), equivalent to 1.06% of China's GDP. Due to the influence of epidemic and the economic downturn in Europe, the cumulative total trade volume between China and Europe from January to November this year decreased by 9% year-on-year. The EU is still China's second largest import partner, but the proportion of exports to the EU has dropped to 14%, lower than that of the United States and ASEAN. Judging from the signing of this investment agreement, China's exports will continue to strengthen in 2021. The economic recovery of the EU, combined with the signing of the China-EU Investment Agreement, is expected to boost China's exports to the EU by about 5% in 2021, equivalent to 0.8% of China's total exports.