China and E.U. Leaders Strike Investment Deal

Chancellor Angela Merkel of Germany prioritized the accord because of its importance to German manufacturers.Credit...Pool photo by Sean Gallup

Chinese and European Union leaders agreed on Wednesday to make it easier for companies to operate on each other’s territory, a significant geopolitical victory for China at a time when criticism of its human rights record and handling of the pandemic have left it increasingly isolated.

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But the landmark pact faces political opposition in Europe and Washington that could ultimately derail it, illustrating the difficulties of dealing with an authoritarian superpower that is both an economic rival and a lucrative market.

A large faction in the European Parliament, which must ratify the agreement before it can take effect, opposes the accord on the grounds that it does not do enough to stop human rights abuses in China. In addition, a top aide to President-elect Joseph R. Biden Jr. has signaled that the incoming administration is not happy with the deal.

Chancellor Angela Merkel of Germany has made the agreement a priority because of its importance to German carmakers and other manufacturers with large operations in China.

The pact loosens many of the restrictions imposed on European companies operating in China, including a requirement that they operate through joint ventures with Chinese partners and share sensitive technology.

The agreement also opens up China to European banks and contains provisions intended to curtail secret government subsidies. Foreign companies often complain that the Chinese government secretly subsidizes domestic firms to give them a competitive advantage.

The agreement will “significantly improve the competitive environment for European companies in China,” Hildegard Müller, the president of the German Association of the Auto Industry, said in a statement before the announcement. “It will provide new impetus for a global, rules-based framework for trade and investment.”

China’s leader, Xi Jinping, also made reaching the agreement a priority, authorizing negotiators to make enough concessions to persuade the Europeans to move ahead.

Wednesday’s announcement was preceded by a video call that included Mr. Xi and Ursula von der Leyen, the European Commission president, to agree in principle on a deal.

European officials said that a breakthrough came in mid-December when China, in a significant concession, agreed to make a stronger commitment to observe international standards on forced labor. China also agreed to step up its efforts to fight climate change.

Ms. von der Leyen said the agreement would provide “unprecedented access to the Chinese market for European investors, enabling our businesses to grow and created jobs.”

“It will also commit China to ambitious principles on sustainability, transparency and non-discrimination,” she said in a statement.

Concluding the pact now is a diplomatic victory for China, which has seen its international standing battered over its handling of the coronavirus pandemic and its crackdowns in Hong Kong and the predominantly Muslim province of Xinjiang.

Those issues — and wariness of Chinese pledges truly to open up to foreign investment — became the focus of opposition to the agreement as the final details were ironed out. For the Chinese, the deal demonstrated that the country does not face significant diplomatic isolation over its handling of human rights.

Source: New York Times