China and the European Union agreed Tuesday to strengthen their trade relationship, pledging to work toward making it easier for foreign investors to get access to China, the world’s second biggest economy.
In a joint statement, the two sides said they committed to widening market access and eliminating discriminatory requirements for foreign companies and agreed that businesses should not be forced to transfer their technology — issues that foreign investors in China have long complained about.
EU leaders Donald Tusk and Jean-Claude Juncker and Chinese Premier Li Keqiang discussed the issues at their summit before claiming a breakthrough in their trade relationship.
“Negotiations have been difficult but ultimately fruitful,” Tusk said.” We managed to agree a joint statement which sets the direction for our partnership based on reciprocity.”
The stakes at the annual summit were high, with two-way trade between the EU and China worth around 575 billion euros ($648 billion) annually. The EU is China’s biggest trading partner, while for the EU, only the United States is bigger.
The EU and China also said they reaffirmed the “rules based multilateral trading system” with the World Trade Organization at its core and plan to intensify discussions aimed at beefing up international rules on industrial subsidies.
China wants a bigger role in the WTO and other international organizations like the United Nations and the International Monetary Fund. But China’s ample financial support for state-owned companies has been the target of Western trade officials. EU Trade Commissioner Cecilia Malmstrom has in the past called out China for “unfair trade practices” including government subsidies intended to give its companies a competitive advantage.
The summit statement shows “China is willing to make some concessions and that’s important,” said Mikko Huotari, deputy director of the Mercator Institute for China Studies, a Berlin-based think tank. The promises don’t mean China will quickly transform from a state-led economy into a market driven one, but “it’s about getting back on track with regard to reform promises and ambitions that the Chinese themselves have expressed,” he said.
The leaders discussed China’s policy of forcing foreign companies to turn over intellectual property as a condition for access to its big and growing market — an issue that Washington has also made a centerpiece of its trade dispute with Beijing.
In their closing statement, they said: “Both sides agree that there should not be forced transfer of technology.”
The EU in December stepped up a WTO legal challenge filed in 2018 against China’s forced tech transfers, calling it a major issue affecting European companies.
Li strongly denied that Beijing is behind industrial espionage, saying the government has never called on Chinese companies to infringe intellectual property rights or steal trade secrets.
The EU’s executive Commission said last month in a strategy report that China was a “systemic rival” which preserves its domestic markets for national champions while placing “onerous requirements” on EU companies doing business there.
Li said after the summit that will change.
“We will not treat EU companies, especially those registered in China, with discriminatory policy, including solely foreign-owned companies in China,” he said. “And likewise Chinese companies should not be discriminated against in their operation in the European Union.”
The summit comes two weeks after Chinese President Xi Jinping agreed during a visit to Paris to work with European leaders to seek fairer trade rules.