China and the EU: Where next in bilateral trade and investment relations?
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China and the EU: Where next in bilateral trade and investment relations? Hannah Levinger1 • Syetarn Hansakul2
Published online: 7 July 2016 China-EU School of Law 2016
Abstract Trade and investment relations between China and the European Union (EU) have reached a momentous significance. China is the EU’s No. 1 supplier of goods and its second-largest export market. In turn, the EU is China’s largest trading partner. Not only goods but also services trade has large potential to grow, even as China undergoes a structural transition and the EU’s single market faces headwinds from a surge in state-centric political forces within Europe. Transport and traderelated services are bound to expand significantly as China’s integration into the world economy continues. Moreover, Chinese tourists have been flocking to Europe in ever greater numbers, giving a boost to related business. Foreign direct investment (FDI) is becoming the next engine of the China–EU partnership. While the EU is a long-standing investor in China, Chinese direct investment accounts for \1 % of the EU’s total inbound FDI stock. Investment relations have seen tremendous dynamism in line with Chinese companies’ outward expansion and Chinese M&A deals vis-a`-vis the EU have grown rapidly in magnitude, scope and sophistication. Finally, plenty of headroom exists for greater adoption of the use of the Chinese Renminbi (RMB) in Europe, supporting financing of both investment and trade. The Bilateral Investment Treaty (BIT) currently in negotiation between China and the EU as well as growing rather than declining interdependence of trade and investment highlight the future potential for a comprehensive free trade agreement between the EU and China.
This article is based on a research note ‘‘EU–China relations: gearing up for growth’’ published as Deutsche Bank Research Current Issues in June 2014 and includes data updates, where available. & Hannah Levinger [email protected] 1
Deutsche Bank Research, Frankfurt, Germany
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Deutsche Bank Research, Singapore, Singapore
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H. Levinger, S. Hansakul
Keywords EU–China trade in goods Trade in services EU–China investment Bilateral investment treaty (BIT) Value chains Renminbi internationalisation Greenfield M&A
1 Introduction During Chinese President Xi Jinping’s visit to Europe in March 2014, the European Union (EU) committed to opening bilateral talks on a free trade agreement (FTA). A formal start of negotiations depends to a large extent on a successful outcome of current talks on the Bilateral Investment Treaty (BIT), in the framework of the EU– China 2020 Strategic Agenda for Cooperation agreed upon at the 16th EU–China Summit in November 2013.1 In particular, European firms are pushing to improve business practices that they see as putting them at a disadvantage in obtaining local funding and local contracts in China. A free trade agreement involves, as mentioned in a joint declaration between Germany and China, ‘‘a longer-term perspective’’,2 and, while there is no specific t
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