Economy & Politics

World EconomyChina-EU: A bad deal at a bad time

Stock ticker in the financial district of Shanghai
Stock ticker in the financial district of ShanghaiGetty Images

You have to call it embarrassing: in the very same week in which the European Parliament condemns the forced labor in the camps in Xinjiang, Berlin and Paris want to quickly conclude an investment agreement with China. Even the timing is suspicious: the EU has been pushing for such an agreement with China for seven years. The last time they got close was in September, but again it failed because of Beijing’s resistance. Last week, however, the communist leadership signaled that an agreement could be found this year.

The European Chamber of Commerce and its President Jörg Wuttke have been pushing for better market access for European companies in China for years. The Chamber repeatedly complains about the compulsory joint venture that many European companies in China are still subject to. Added to this are the lack of protection of intellectual property, unfair refinancing options for Chinese companies, discrimination in public tenders and the influence of communist party cells on business decisions.

To put it briefly: you want symmetry; what Chinese companies are allowed to do in Europe, European companies should also be able to do in China.

Many companies want more legal security and transparency in their investments in China. “Since the outbreak of the pandemic, China has been one of the few bright spots for German car manufacturers, but also for many mechanical and plant engineering companies,” says Georg Stieler from Shanghai from the management consultancy of the same name. “A fairer market environment would therefore be welcome in principle.” Only what is currently going on in detail, nobody knows, complains Stieler. “The whole negotiation process takes place behind closed doors.”

It is known that Beijing is currently keen to invest more in the EU’s energy sector. Should the agreement come about, “we can expect China to operate all of the petrol pumps for e-mobility in Europe,” the WirtschaftsWoche quotes an insider. In addition, the Chinese leadership is said to be investing in aviation, hydrogen mobility and the health sector. France and Germany in particular are pushing for a deal as their companies would benefit most from it.

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Just recently, a group of European China experts, including Mikko Huotari, from the Mercator Institute for China Studies in Berlin, warned against a hasty conclusion. Precisely because the agreement is a milestone, it must be negotiated well. Despite seven years of negotiations, the text is currently only a modest step towards reciprocity in trade relations.

The timing is not a coincidence

Last but not least, the timing of the agreement has a geopolitical dimension: In Beijing, after Donald Trump was voted out of office and his confrontational, but also often erratic course towards China, people are preparing for new challenges. Joe Biden should in principle rely on a little more relaxation compared to Beijing. However, Biden has also announced that it will again rely more on international alliances. But a joint anti-China policy by Brussels and Washington is anathema to Beijing. An investment deal before Biden came to power creates a fait accompli and offers China backing in the trade dispute with the US.

It is shameful that the agreement should be signed now, of all times, because from a human rights perspective there is so much to criticize than it has been since the Tiananmen massacre in 1989. Only at the beginning of December did research by China expert and activist Adrian Zenz show that around half a million Uighurs, Kazakhs and other minorities are being forced to harvest cotton in camps. The agreement should therefore also contain a ban on forced labor. Beijing has been reluctant to do this so far.

After all, if the agreement is reached this week, it has to go through the European Parliament. MPs like the Green politician Reiner Bütikofer have already announced resistance.

Philipp Mattheis reports for from China. From 2012 to 2015 he was China correspondent for Wirtschaftswoche.


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