China and EU Join Forces to Challenge US Hegemony

Xi Jinping Concedes Labor Rights to Reach Investment Agreement After 7 Years
Biden's Strategy to Pressure China Faces Inevitable Setbacks

[Asia Economy Beijing=Special Correspondent Jo Young-shin] China and the European Union (EU) have agreed to conclude an investment agreement that has been in negotiation for seven years.

China's state-run People's Daily reported on the 30th (local time) that Chinese President Xi Jinping, German Chancellor Angela Merkel, French President Emmanuel Macron, European Commission President Ursula von der Leyen, and European Council President Charles Michel attended a video conference and agreed on the conclusion of the China-EU investment agreement on the 31st. This agreement comes seven years after both sides began negotiations in January 2014.

[Image source=EPA Yonhap News]

The direct background to the resolution of the long-standing difficult negotiations for the China-EU investment agreement is the US-China conflict. As the Donald Trump administration attacked China's Achilles' heels such as the Hong Kong National Security Law, Taiwan independence, South China Sea sovereignty, and human rights issues concerning Uyghurs in Xinjiang, the Chinese leadership hurriedly accepted the EU's demands, according to prevailing analysis. The EU secured 'practical benefits,' while China gained the justification of 'multilateralism.'

With China successfully embracing the EU, the US's largest ally, setbacks are expected in President-elect Joe Biden's China strategy.

China Grants European Companies Independent Operating Rights

Until now, the biggest obstacle for European companies entering the Chinese market was the 'joint venture' requirement. European companies had to establish joint ventures with Chinese companies to enter the Chinese market. Consequently, European companies faced risks such as technology leakage. With this agreement, European companies will be able to enter China independently.

China also promised to prohibit forced technology transfers by foreign companies. It guaranteed full competition with Chinese state-owned enterprises. China agreed to increase transparency regarding subsidies and pledged to prohibit discrimination against foreign investors by state-owned enterprises.

China also made concessions on human rights issues that major European countries have consistently raised. China pledged to 'continuously strive' to comply with the International Labour Organization (ILO) convention on the prohibition of forced labor. Although China has previously claimed there was no human rights oppression or labor exploitation of ethnic minorities, this agreement appears to acknowledge human rights issues to some extent.

Industries expected to be promising for European companies' entry due to this investment agreement include finance (fintech and e-commerce), automobiles (electric vehicles), telecommunications (cloud services), environment (carbon neutrality), shipping and aviation, real estate, and healthcare.

China Opens Market and Gains the Justification of 'Multilateralism'

This agreement is widely analyzed as a 'political decision' rather than an 'economic decision' by the Chinese leadership. The prevailing view is that China gained more than just economic benefits symbolically by joining hands with the EU, the US's largest ally. It is believed that China did not make a losing deal with the EU.

First, the fact that China and the EU, the US's largest ally, have formed economic ties is significant. The EU, having secured practical benefits, is unlikely to join the US's 'China isolation campaign.'

Moreover, this agreement will inevitably increase dissatisfaction among US companies. Unlike EU companies that can enjoy investment benefits, US companies receive no such benefits. This is expected to pose a considerable burden on the new Biden administration.

Wang Yi, China's State Councilor and Foreign Minister in charge of diplomacy, recently emphasized the importance of the bilateral investment agreement during a meeting with an EU member state delegation stationed in Beijing, stating, "Between China and Europe, cooperation is far more important than competition, and common understanding is far more important than differences," which appears to be directed at the US side.

Regarding this investment agreement, China's state-run Global Times evaluated that the establishment of a strong institutional framework for attracting investment by the Chinese government reflects the government's will and confidence to open the market.

This content was produced with the assistance of AI translation services.