Chinese envoy: A bilateral investment deal with the EU is in sight

In an exclusive interview with EURACTIV, the Chinese Ambassador to the EU says next week’s EU-China summit will accelerate work to achieve progress.

H.E. Ambassador Yang Yanyi is Head of the Chinese Mission to the EU. Ambassador Yang Yanyi started as a career diplomat back in 1980s, in the Embassy of the People’s Republic of China to the United Republic of Tanzania (1981-1983). During her long diplomatic career, she has gathered experience in both bilateral and multilateral arenas. In 1992, Yanyi was appointed Counselor in the Permanent Mission of the PRC to the United Nations. She was appointed as Head of Mission of the PRC to the European Union in January 2014.

She spoke to EURACTIV’s Editor-in-Chief, Daniela Vincenti

The EU and China launched negotiations for an investment agreement three years ago. Where do we stand on the eve of the EU-China summit?

China and the EU enjoy one of the world’s biggest and most dynamic trading relationships. Their trade and investment exchanges have become a major engine driving their respective economic development and innovation.

To launch and conclude negotiations on an ambitious comprehensive China-EU Investment Agreement is to provide a simpler and more secure legal framework to investors of both sides and tap the full potential of China-EU cooperation, and ensure that their economies remain key drivers for global economic growth and prosperity.

To this end, China and the EU have been actively engaged in negotiations with six rounds being conducted so far. Guided by a cooperative spirit, the negotiations have been constructive, intensive and in-depth. The two sides have enhanced mutual understanding and narrowed down differences. We both agree to accelerate the negotiations so as to achieve substantial progress by the end of this year. During the 17thChina-EU Summit, Premier Li Keqiang will exchange views with his European counterparts on this important topic and provide political guidance for future work.

There seems to be a rush for Chinese investment in Europe, with the UK leading the race. At the same time, there is rising opposition against TTIP here. Do you have a sense that there is now more than ever a sense of urgency for the EU and China to sign a Bilateral Investment Treaty?

Your question actually points to some growing trends. For one thing, with its economy being upgraded and gaining strength, and with multiple measures to reduce administrative approvals for various types of economic activity and reform the investment and financing systems, China’s outbound investment is growing and China is poised to become a net exporter of capital.

For another, a gradual economic recovery of the EU is raising the appeal of the European economy in the eyes of foreign investors, including Chinese companies and wealthy individuals who view Europe as a safe, stable destination. Such should be welcoming trends since the increase of Chinese investments in Europe would benefit closer ties and joint prosperity in trade and business of the two biggest economies and also facilitate the EU’s deliveries on growth, jobs and competitiveness. As I said before, China and the EU are working on their Investment Agreement and this Agreement should replace the existing bilateral investment between China and EU member states with one single comprehensive agreement covering all EU member states.

What’s the Chinese take on having an investor-state dispute settlement mechanism in the BIT. Is this controversial with China, as much as it is with the US?

Most of the existing investment protection agreements between China and the EU member states have already included (an) ISDS clause.

A bilateral investment treaty between China and the EU with ISDS terms will ensure better protection of bilateral investment.

It is true that the current ISDS mechanism still has some deficiencies. The European Commission has proposed to reform it. We are now conducting scientific feasibility studies. We look forward to working with our EU colleagues to find proper solutions through consultation.

European companies doing business in China are cutting investment amid growing concerns over flagging growth prospects and dwindling profits there. At the same time they are still struggling with persistent regulatory barriers in China. Is this something that can be solved?

I wish to share with you the following. First, the hard fact and simple truth is European companies are still making profits in China and that European investment in China has been rather dynamic. In the first quarter of this year, investment from 28 EU countries grew by 23.2% year-on-year, increasing faster than the average growth rate. And according to the European Chamber of Commerce, more than 50% of the European companies remain optimistic about their growth prospects in China and make China one of their top three priority destinations for investment and business. In the words of Joerg Wuttke, President of the EU Chamber of Commerce, for European companies, “China is too important in size and still has potential. There is no second China.”

Second, with the Chinese economy entering the “new normal” and transformation of its growth model, it is natural and normal that some European companies show a certain degree of uneasiness. Along with the practice of “national treatment” among foreign enterprises, such preferential treatment enjoyed in the past will be bygones. The strengthening of labor law enforcement and environmental law enforcement in China will also make things different. And with the competitiveness of Chinese enterprises growing from strength to strength, the Chinese market will become more competitive. In short, there will be no business as usual for Chinese and foreign companies alike.

Third, China remains steadfast in opening up and in win-win. As pointed out by President Xi Jinping, “China will only increase its openness to the outside world. Our long-held policy of welcoming foreign capital will not change. Our firm stance to protect the legitimate rights and interests of foreign investors will not change. And our commitment to provide ever better service for foreign companies in China will not change.”

Among others, China is improving foreign investment laws and regulations, and exploring a management model for foreign investors with pre-entry national treatment. Measures will also be taken to provide better IPR protection and to safeguard (the) lawful rights and interests of foreign investors and enterprises.

Fourth, to be successful in any market, it is important to have a grasp of long-term trends and strategic vision and learn to adjust to changing circumstances. In this connection, it has been noted that many European companies are now trying to re-tool their business strategies as China is adjusting its economic structure to a more value-added model. I believe this is the right approach and sensible response.

The EU and China are planning to sign an agreement on fighting climate change before the COP21 conference in Pris. Can you give us a sense of what is going to be in that agreement? It seems that the pact will unlikely include any carbon reduction goals.

China and the EU have a critical role to play in combating global climate change, one of the greatest threats facing humanity.

Given the seriousness of the challenge, China and the EU have made responding to climate change, and environmental protection, one of the priorities for cooperation in the China-EU 2020 Strategic Agenda for Cooperation.

Since the text of the proposed China-EU joint statement on climate change is still under discussion, understandably, at this stage there aren’t many details I can share with you.

What I can say is that China and the EU have dedicated significant resources to advancing the climate change negotiations and securing an ambitious possible outcome at the Paris Conference of the Parties. The upcoming 17th China-EU Summit will be partly dedicated to designing a joint approach.

A joint statement on climate change will be a clear demonstration of the commitment of China and the EU to work constructively together for the common good. China and the EU will reaffirm the importance of strengthening bilateral cooperation on climate change and work together with other countries to adopt a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties at the United Nations Climate Conference in Paris in 2015. And they are committed to reaching an ambitious 2015 agreement that reflects the principle of common but differentiated responsibilities and respective capabilities, in light of different national circumstances.

Beyond investment, where would China want to strengthen its partnership with the EU?

Thanks to their concerted effort and vigorous cooperation over the past 40 years since establishment of their diplomatic ties, China-EU relations have evolved and matured, transcending the realm of trade to now cover a wide spectrum of political-security, economic and social-cultural cooperation.

With the global economy undergoing profound adjustment, and its recovery still facing twists and turns, it is important and relevant that China and the EU work closely together to tap the full potential of China-EU partnership.

In line with the implementation of the China-EU 2020 Strategic Agenda for Cooperation, we will support and participate in each other’s initiatives, especially aligning the One Belt One Road initiative short for the Silk Road Economic Belt and 21st Century Maritime Silk Road, and (the) EU’s Investment Pla, which enjoy a certain degree of synergy.

With a view to combining China’s comparative advantages in production capacity and equipment manufacturing, with advanced technology and management experience of developed countries to better meet the needs of vast developing countries in infrastructure construction and industrialization, we look forward to enhancing cooperation with the EU in scientific technology and innovation, including innovative projects relating to 5G, 5G standards, high-tech innovation, internet, e-commerce, advanced digital services, cyber security, big data, smart cities and smart energy.

It is also important for both China and the EU to deepen financial cooperation and expand exchanges on macroeconomic policy, and maintain close communication on international economic and financial issues. In this connection, China and the EU are satisfied with progress made in their Economic and Financial Dialogue and the Working Group between the Presidents of the People’s Bank of China and the European Central Bank.

To promote sound development of their cooperation and enabling environment for business, it is highly necessary to deepen understanding of each other’s legal systems. In this connection, it is necessary and important that China and the EU strengthen consultation on justice and law enforcement cooperation.

We are committed to expanding and facilitating people-to-people exchanges to promote mutual understanding and intercultural dialogue and ensure that China-EU relations will be anchored in strong public support.

Equally important, we stand ready to enhance strategic communication and coordination with the EU at bilateral, regional and global levels to effectively confront global issues, and contribute to world peace, development, and cooperation.

As this year marks the 70th anniversary of the victory of the World Anti-Fascist War and the Chinese People’s War of Resistance Against Japanese Aggression, and the 70th anniversary of the founding of the UN, together with the EU, we will reaffirm our commitment to remembering history, honoring the fallen heroes, cherishing peace, and creating a better future, and making the international order and system more just and equitable.

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