No Promise Left Behind: The Effort to Court EU FDI through a China-EU BIT

Dr. Jean-Marc F. Blanchard's picture

China and the European Union (EU) have been discussing a bilateral investment treaty (BIT) for a long time. Indeed, the two sides held their 21st round of China-EU BIT negotiations in June 2019. This round seemed odd given that just 1 year before Chinese media and connected interviewees were touting China and the EU were on the verge of completing a BIT despite unresolved issues pertaining to financial sector access, umbrella clauses, and intensifying EU member reviews of Chinese foreign direct investment (FDI). Regardless, three months after the 21st round, the two sides were conducting their 23rd round with yet new prognostications of a deal due to United States (US) trade pressures and China’s embrace of market reforms. More recently, there has been optimism, voiced most recently at the CIIE, due to Chinese measures (legal, regulatory, and rhetorical) to welcome FDI by opening the financial sector, forbid forced technology transfers, and escalate penalties for the violation of intellectual property rights. Still, China’s focus on its trade war with the US has distracted it from paying full attention to BIT negotiations. More substantively, both sides seem unwilling to accommodate the other’s demands. The EU feels, for instance, that China has yet to create a true level playing field. Aside from this, according to some sources, China’s expanding application of its social credit system seems to be complicating negotiations because of the unclear ramifications of this system for foreign businesses in China. What basis is there now for concluding there will be success when 23 previous negotiating rounds failed? Yes, China’s growth rate has slowed. Yes, China is in a trade war. Yes, China courts European capital in certain sectors. But it is enough? These incentives are strong, but it is not clear they are potent enough to produce truly dramatic change.