After seven years of talks, the European Union and China have agreed in principle on an investment agreement after their leaders met on a conference call on Dec. 30. The parties had set the end of 2020 as the deadline to strike a deal.

The European Commission said that the Comprehensive Agreement on Investment (CAI) will give EU investors an “unprecedented level” of access to the Chinese market and will “significantly improve the level playing field” between the two parties.

The EU was represented by the president of the European Council, Charles Michel, and the President of the European Commission, Ursula von der Leyen, and China by President Xi Jinping.

In addition to the meeting, an exchange took place between the French President, Emmanuel Macron, the German Chancellor, Angela Merkel, and Xi as a follow up of their meeting in Paris in March 2019.

The agreement includes commitments on environment and climate as well as on labor standards. The two sides will aim to conclude negotiations on investment protection within two years of the signature of the CAI.

The agreement states the “clear prohibition” of requirements that compel transfer of technology, excludes interference in contracting technology licensing and the protection of confidential business information, the Commission said.

The deal will guarantee equal access to standard-setting bodies and enhance predictability in obtaining authorizations for EU companies operating in China. The Asian powerhouse also committed to respecting core principles of the International Labour Organization (ILO) and to ratify ILO rules on forced labor, it added.

The Chinese mainland is becoming an increasingly important market for the luxury industry. According to a survey carried out by the consultancy Bain & Company and the Chinese e-tailer Tmall, the luxury goods market is estimated to have grown by 48 percent this year in Mainland China to 346 billion yuan renminbi (€43.2bn, $53.0bn). Meanwhile, Mainland China’s share of the market nearly doubled, growing from about 11 percent last year to 20 percent in 2020 as the global luxury market declined at an expected rate of 23 percent in 2020. The increase in domestic buying was due to travel restrictions caused by the Covid-19 pandemic. Bain estimates that in 2019, Chinese consumers only bought 32 percent of their luxury goods in the mainland compared with 70 to 75 percent this year. It expects the share to subside over the next five years as global conditions normalize.

Bain forecast that in 2025, Chinese consumers will spend between €150 billion and €180 billion in luxury goods, of which 55 percent will be spent in Mainland China, making it the world’s largest market for such products.

Photo: iStock/daboost