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China, EU may launch investment pact talks

09-21-2011 09:21 BJT

BRUSSELS - The European Union and China could start talks as early as next month for the first pan-European investment pact with a foreign power, the EU's top trade official said on Tuesday.

Chinese direct investment into Europe tripled between 2009 and 2010 and Europe is one of the top-five sources of foreign direct investment (FDI) to China.

However, Europeans have been frustrated by Chinese rules on investment in its growing market. And while Chinese investment has been welcomed in Europe at a time of crisis, some Europeans would like to limit Beijing's acquisition of strategic assets.

Such concerns have led to calls for a treaty that would oversee and safeguard investments.

EU and Chinese leaders are due to meet in the Northern Chinese city of Tianjin on Oct 25 to take stock of global and bilateral issues, EU officials said.

"I hope that ... when we have the EU-China summit in Tianjin, we will be able to launch these negotiations or at least come to agreement in principle to do so," EU Trade Commissioner Karel De Gucht told EU executives and officials at a seminar on challenges facing EU businesses in China.

De Gucht rejected calls for formal vetting of Chinese investment in Europe which has climbed to 900 million euros in 2010 from 300 million euros in 2009 according to EU data. This still represents just 1.7 percent of the FDI into the EU.

"I believe Europe's open investment regime remains our strongest argument for others to grant us similar access," he told the seminar.

Yet he said that for talks to begin, China will have to show it is willing to open its doors to European investors attempting to gain a foothold in the emerging economy, which is expected to account for one third of world growth by 2015.

"We need to be firmly convinced that (an investment treaty) will produce real added value for EU companies, both in terms of access to the Chinese market and the way their investments are treated in China," he said.

Pan-European pact

Europe is growing increasingly dependent on China for the health of its economy, yet De Gucht warned the bloc could erect trade barriers to counter Chinese subsidies for domestic high-tech industry, and close the door to bids for European public works contracts unless Beijing accepts more European bids.

He made no mention of demands renewed by Premier Wen Jiabao last week that the EU recognise China as a market economy, a move Wen said would be just recompense for Chinese support for Europe in ites sovereign debt crisis.

It is unclear what shape an investment treaty would take, but De Gucht said it would likely include clauses safeguarding investments on both sides. Brussels would also push for better market access, hampered by red tape and Chinese requirements that EU firms set up joint ventures with Chinese firms.

Equally unclear is how EU member states will react to moves towards a pan-European investment treaty that would override some 25 bilateral deals already in place.

The 2009 Lisbon treaty has shifted power over European investment policy to Brussels. Still, under EU rules De Gucht needs a mandate from member governments to negotiate a pact with China, and capitals have been reluctant to give up control over bilateral investment treaties, a foreign policy backbone.

Europe's main lobby for firms operating in China, the EU Chamber of Commerce in China, called for a coordinated EU policy toward China to help remove barriers to China's markets.

"Some of these problems that we are facing now, probably with (an investment) treaty would at least be lifted," Davide Cucino, President of the Chamber, said on Tuesday.

Chinese diplomats in Brussels were not available to comment on a planned launch of talks.

Canada and India could also be in line for a single investment treaty with the EU as part of their ongoing talks for free trade agreements.


Editor:Zhang Rui |Source: China Daily

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