EU-China agreement: political relations and economic benefits

On the 30th December 2020, after 7 years of negotiation, President Xi Jinping and EU leaders confirmed the first EU – China Comprehensive Agreement on Investments (CAI), which covers a geographical area worth approximately 25.8 trillion US dollars, corresponding to 30% of global GDP and 24% of total population.

Under the agreement with Brussels, Beijing will ensure greater access to European investment in strategic sectors and a specific focus on sustainable development.


Benefits for European companies

The agreement reduces barriers to investment for EU companies by amending the requirements for joint ventures and other restrictions, and ensures new access to the automotive, manufacturing, financial, private health, construction, and maritime and air transport sectors.

Greater protection for investors in competition with Chinese state-owned companies, rules against forced transfers of technology and greater transparency on subsidies will be ensured. China is committed to implementing the international labour organization conventions already ratified and implementing the Paris Agreement on climate change.


Previous agreements on trade and investment

Europe is moving closer to Asia, after the free trade agreements signed with Vietnam, in force since 2020, Singapore (2019), South Korea (2015) and the ongoing negotiations with India and ASEAN.

Beijing continues its action to combat tariff and trade war policies, following the signing of the Regional Comprehensive Economic Partnership and the proposal to enter the Comprehensive and Progressive Agreement for Trans-Pacific Partnership is increasingly established as a leader in international trade.

China already promoted the investment and trade cooperation initiative with Central and Eastern European countries (17+1) has already signed free trade agreements with Switzerland and Iceland, tax agreements with 38 countries in Europe, agreements for the exchange of financial data with Liechteinstain and San Marino and conventions for social security contributions with Denmark, Finland, Germany, Luxembourg, the Netherlands , Spain and Switzerland.


Europe-China investment and trade

China's main investments in the EU are in cars, consumer products, finance, healthcare and healthcare, while European groups invest in China in the chemical, automotive, agricultural, energy and financial sectors.

According to data from the PRC General Administration of Customs, between January and November 2020 the EU traded a total of $581 billion with China.

The member countries with the largest trade with Beijing are Germany (USD 171 billion), the Netherlands (USD 82 billion), France (USD 59 billion) and Italy (USD 59 billion), while the countries with the lowest volume are Estonia (USD 1.03 billion), Luxembourg (USD 1.09 billion), Latvia (USD 1.13 billion) and Malta (USD 1.54 billion).


The role and benefits for Italy

Among the countries with the largest exchanges, Italy is the closest to Beijing, after entering the Belt and Road in March 2019 it was the first of the EU founders to have joined the new Silk Road, before Luxembourg which also hosted the annual meeting of the Asian Infrastructure Bank, the main financier of the project. Italy, together with the MOU Belt and Road, has signed a new tax convention with China, which could be ratified in 2021 and is the latest tax agreement between China and Europe. The Double Taxation Treaty signed in Rome on 23 March 2019 is the best among EU countries for tax rates on income from investment and trade.

Beijing is promoting political relations with both Rome and Brussels alongside several agreements targeting future economic relations.

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