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Foreign investment monitor Q2

Will EU/China trade agreement ever be ratified?

In the last edition of Foreign Investment monitor we looked at the potential for the EU-China investment agreement to boost cross-border capital flows between East and West. At the time a diplomatic row had broken out between Europe and Beijing, with the European parliament freezing the ratification of the deal until China lifts sanctions on European human rights advocates. With many commentators speculating this is unlikely to happen, there are now serious questions about whether the agreement will ever be signed into law.

boat in a harbour

Cargo port and harbor, Hong Kong.

Talks between the two sides had been rumbling on for close to seven years before Germany assumed the presidency of the European Council in July last year. Then, Chancellor Merkel – with Germany’s manufacturing sector keen to further open up the Chinese market – made it a priority to bring the negotiations to a conclusion, which she accomplished just a few days before the change of administration in the US. Now however, as Germany prepares for its own elections in September that will install a new Chancellor for the first time since 2005, it is questionable whether her successor – or indeed any other European leader – will have the will (or political capital) to finally get the deal over the line. Chinese officials say Beijing is still open to finalizing the agreement but will not tolerate interference from foreign governments in its internal affairs. With US calls for a “coordinated approach” to China among Western powers, the upcoming elections in Germany (2021) and France (2022), and President Xi’s likely re-election as general secretary of the Chinese Communist Party, there is currently little to suggest that ratification is around the corner.

Our team

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