EU-China investment Agreement (CAI) Lacks Reciprocity and EU Continues Disregard for Human Rights

After seven years of negotiations, the EU and China signed the China-EU Comprehensive Agreement on Investment（CAI）at the end of 2020. The EU declared that “CAI will help rebalance the trade and investment relations between the EU and China once in effect, and EU companies will benefit from fairer treatment when competing in the Chinese market”. So is the CAI really reciprocal?

First of all, from the perspective of investment fields, the agreement broadens the EU in China's investment fields, such as renewable energy and high-tech manufacturing. In addition, China has also promised to begin gradually opening up international maritime and air transportation, health, finance, business services, research and development, and telecommunications /cloud services, health, environmental protection services. However, the CCP has clearly been prepared before that and has passed legislation to impose substantial restrictions on EU investment. For example, the 2020 version of the "Special Administrative Measures for Foreign Investment Access (Negative List)" explicitly prohibits investment in many fields, and some fields only allow investment in joint ventures. At the same time, the "Measures for the Security Review of Foreign Investment" passed at the end of November 2020 requires foreign investment to conduct security reviews. The review areas include “important agricultural products, important energy and resources, major equipment manufacturing, important infrastructure, and important transportation services, important cultural products and services, important information technology and Internet products and services, important financial services, key technologies and other important fields”. In contrast, the EU has not imposed similar restrictions on Chinese investment in the EU.

Regarding the share of investment shares, China’s laws and regulations also set upper limits on foreign shares, including clearly stating that in some areas the Chinese party must “hold” or “obtain effective control of the invested enterprise". China's investment in the EU is rarely subject to such restrictions, and it can even acquire related companies. For example, China National Building Materials Group Corporation acquired Avancis (German manufacturer of CIGS photovoltaic modules), Xinjiang Goldwind Company acquired German wind-turbine maker Vensys Energy AG, Midea acquired the German robotics company KUKA, China National Chemical Corporation acquired the KraussMaffei Group (a manufacturer of industrial machinery), and Chinese capital becomes the largest shareholder of Daimler. One of the pitfalls of this non-reciprocity is that the EU will not have any countermeasures if Chinese related industries dump in the EU. In fact, many investment areas of the CAI have been included in the "Made in China 2025" by the Chinese Communist Party (CCP). China's goal is to raise funds from the EU, to master the EU's advanced technology and management in related industries through mandatory "cooperation" and "joint development", so as to gradually achieve a strategic upgrade of China's industry.

In addition, the CAI does not provide specific provisions for effective arbitration in the event of disputes, so in the end, it can only be determined in accordance with the provisions of the World Trade Organization. In the past two decades, the United States and the European Union have complained to the WTO about China’s trade barriers and unfair technology transfer, and all the endings are unresolved. Since the Chinese government has not signed the "Government Procurement Agreement", the cost of China's breach of the agreement can only be borne by the other party, so the arbitration claimed by the EU is nothing more than arbitration by each. The CCP is free to invoke national security provisions to prevent or restrict investment by EU companies as well as hunt, induce or force technology transfer from EU companies. Once this happens, because China prohibits EU investment in areas related to legal affairs and does not allow EU lawyers to become partners of Chinese law firms, it is difficult for EU parties to find qualified lawyers to litigate against the government departments and businesses in China, let alone expect an independent court. In contrast, China can run sole or joint law firms in many EU countries to represent Chinese companies in legal matters in the EU

The areas not covered by the CAI are also an important reason for the current $164 billion trade deficit and investment lacking reciprocity between the EU and China. For example, China prohibits the European Union from owning or partially owning airports or ports in China by way of investment, but China currently owns or partially owns 3 airports (including Heathrow) and 6 seaports in the EU.

The CAI does not provide for investment in the fields of social sciences, education, and media, in which the EU has the most strength and the least reciprocity. China expressly prohibits foreign investment in the fields of humanities and social sciences research, compulsory education, religious education, social surveys, etc. In the past two decades, China has funded almost all the humanities and social science disciplines of leading universities in the EU, engaged in social research and research development, set up more than 130 Confucius Institutes in EU countries and nearly 300 Confucius classes in secondary schools, exporting authoritarian ideology through acculturation and corrupting academic freedom in the EU. The CCP prohibits foreign investment in news agencies, books, newspapers, periodicals, audio-visual products and electronic publications in China, but the CCP's official media and affiliates are allowed to invest and operate in the EU and become the mouthpiece of the Party's foreign propaganda.

Regrettably, the "Investment Agreement" does not stipulate the prohibition of forced labour, nor does it include provisions to protect labour. The Chinese government’s blank check of “continuous and sustained efforts” to “ratify the ILO’s basic convention on forced labour” is nothing more than a loincloth handed to EU politicians and capitalists so that they can pretend not to see the Uighurs and other Turkic Muslimin in the concentration camps in which they are forced to produce slave labour products.