A China-Europe freight train with 45 compartments of anti-pandemic supplies leaves the Xinzhu Railway Station in Xi’an, China on Aug 12, 2020, to head for Italy’s Milan. Photo: XINHUA 

2020 marks the 45th anniversary of the establishment of diplomatic relations between China and the EU. Their bilateral ties have become one of the most stable relationships among global powers.

Resilient relationship

Although the sudden outbreak of COVID-19 has impeded foreign trade and international exchange, the bilateral relationship between China and the EU has remained resilient while the two sides strive to tide the difficult period together. Leaders of China and European countries spoke on many occasions when pandemic prevention and control was at its most critical moments. The two sides exchanged material aid, jointly established expert panels, and cooperated on vaccine development. China also sent teams of medical experts and held video conferences with EU countries. The joint fight against the pandemic has further cemented the mutual political trust between both sides and has paved the way for even closer ties.

Both China and the EU firmly uphold multilateralism and a multilateral world order, and believe in solving disputes through dialogue and consultation. For years, the two have been important partners in trade, investment, technology and culture. This benefits enterprises and people of both sides. The strong ties now function as a central pillar for global trade, fighting against anti-globalization headwinds. The pandemic is making both sides acutely aware of the necessity for cooperation, and the fact that the two sides have common interests.

As the world encounters changes unseen in a century, China and the EU as the world’s major economies and important forces have the responsibility and the ability to combat unilateralism and protectionism. The two should steer the global economy back on track, inject more certainty into the world economy, and give it new momentum.

It is no coincidence that China and the EU should choose to align with each other in an increasingly uncertain world. Several EU member states have been hard hit by the pandemic. The IMF predicted in June a 10.2% economic downturn for the Eurozone in 2020. This is combined with some members’ rising interest in withdrawing from the EU, the Brexit aftermath, prevailing populism and hegemonic pressure of the US on trade and defense.

China is one of the beneficiaries of globalization throughout its 40 years of reform and opening up. However, the country’s drive for high-quality development and modernization are now challenged by the fractured global industrial chain and supply chain. These fractures are deepened by the pandemic, as well as a trade war and technological decoupling waged by the US, two gestures driven by the mindset of a “new cold war.” Although China has begun to shift its economic focus to the domestic market, it is still essential to continue international cooperation and keep the industrial chain and supply chain secure and stable, which requires closer cooperation between China and the EU.

Three focuses ahead

At the EU-China leaders' meeting held this September, both sides welcomed the signature of the China-EU agreement on geographical indications, and promised to speed up negotiations on an investment treaty. In addition, China and the EU decided to establish a China-EU High Level Environment and Climate Dialogue and a High Level Digital Dialogue, in a bid to forge a green partnership and a partnership on digital cooperation. These important decisions will be included into the Strategic Agenda for Cooperation 2025, an agreement under joint development by both sides. The meeting expanded and deepened China-EU cooperation for the next five years. As the bilateral relations stand at a new historic starting point, both sides bear major historic responsibilities while pursuing the great development opportunities ahead. We need to focus on three points to build on the consensus that leaders of both sides reached at their recent meetings.

First, we must accelerate the conclusion of the China-EU Comprehensive Agreement on

Investment (CAI). Since 2012, the two sides have become important investment partners. China has been the EU's second-biggest trading partner and the EU is China's biggest trading partner over the past decade or so. In the first seven months of 2020, China became the EU’s top trading partner. China is also one of the most important overseas markets for the EU. As of April, 2020, the EU (excluding the UK) accumulatively invested 114.2 billion USD in China, making it the third largest cumulative investment source. Meanwhile, the EU is also a popular outbound investment destination for Chinese enterprises. China has set up more than 3,200 direct investment enterprises in the EU, with a total investment of over 80 billion USD (again, excluding the UK).

Negotiating and signing a free trade agreement meets the mutual interests of both sides, and the CAI will lay a foundation for such a trade agreement. Since 2013, 30 rounds of negotiations have been made for the CAI. At last year’s China-EU leaders' meeting, both sides agreed to speed up negotiations on an investment treaty before the end of 2020. Since then, efforts have increased. The progress has accelerated since the outbreak of the pandemic, with the EU eager to cushion the blow of the post-Brexit dilemma and economic recession in Europe. The agreement will also help stabilize China’s foreign trade and investment, so that the country can better cope with economic and trade frictions with the US.

At the final stage of negotiation, China and the EU focused on tackling key problems, including the negative list and the text-based negotiation concerning investment protection, market access, investment regulation, Sustainable Operations Management, and more.

Objectively speaking, China and the EU are at different stages of development, so it is neither reasonable nor possible to take a one-size-fits-all approach and require both sides to open to each other in exactly the same ways. Therefore, negotiations should be flexible, practical, and based on mutual understanding and mutual interests. Both sides must seek common ground while resolving differences.

China is willing to continue its efforts on opening market access, increasing imports, protecting intellectual property rights, implementing Foreign Investment Law, and improving the business environment. The EU should look at Chinese enterprises’ investment in the EU in a rational and objective way, and provide China-invested enterprises with fair, transparent and equal treatment. This would mean not conducting administrative interventions and safety reviews too frequently. After all, the maximum interests for both sides can only be obtained with two-way openness, a level playing field and win-win cooperation. A comprehensive, balanced and high-level investment agreement concluded on schedule, before the end of the year, will not only become a milestone in the history of China-EU bilateral ties, but also pave the way for the China-EU free trade area and a more stabilized global industrial chain and global economic growth.

Going forward, both seek to explore new channels of cooperation in the digital economy. China and the EU both prioritize innovation and the digital economy. EU member states have formulated innovation strategies to strengthen their digital industries, and the EU has specifically launched the Digital Single Market Strategy. China has not only released the innovation-driven development strategy, Internet Plus, Internet Power strategy, Artificial Intelligence Development Plan, but also has many large-scale ICT companies, such as Alibaba, Tencent, Baidu, and Huawei. Many Chinese companies and their EU counterparts have joined hands in the digital and artificial intelligence industry, with cooperation between China's “Made in China 2025” plan and Germany's Industry 4.0 setting a model.

In recent years, as global competition is becoming more fierce regarding industrialization and cutting-edge technologies such as AI, big data, and block chain, it has become even more urgent for China and the EU to deepen cooperation in the digital economy. The US remains at top rank with the strongest overall digital presence in the world. The country holds a “monopoly power” in the majority of technical standards. Not only have digital tycoons like Microsoft, Google, Apple and Amazon greatly challenged small and medium-sized digital enterprises, the US government has also adopted a worldwide “force-out” approach against Huawei’s 5G products.

At times like this, China and the EU will both find themselves in zugzwang if they fight alone. The two can only take the initiative by cooperating and complementing each other. By joining forces, both sides will not only make more technological advances and industrial development, but also improve their overall strength and gain more bargaining chips with standard-setting.

Therefore, more EU-China dialogues on digital economy and global governance cooperation should be made between governments, enterprises, think tanks, and civil societies. When jointly setting up standards, laws and regulations concerning the internet, discussing new generations of IT and the digital economy, China and the EU can build on their common interests and potential areas of cooperation. The EU should also demonstrate strategic vision and political courage concerning the use of 5G networks, a perplexing issue for both sides. The EU should look at the long-term development benefits, act on its own behalf, and go beyond “American factors” and ideological interference. A sound decision made by the EU that answers to the call of an open market, a level playing field, and follows the principles of impartial law enforcement, will help generate new opportunities for China-EU cooperation on advanced technologies in key areas.

Third, China and the EU should cooperate on green development. The two sides have achieved fruitful results in environmental cooperation. The recent European Green Deal proposed by the European Commission will accelerate the EU’s industry transition to a sustainable model of inclusive growth. The initiatives target not only helping the EU overcome the current crisis with “green development”, but also helping the community nurture new avenues for future competition.

China has prioritized a “green transformation” and “new infrastructure” when investing, and the EU also plans to invest heavily in green industry to pursue a “green recovery.” There are plenty of potential opportunities that the two sides can work together on, including renewable energy, energy conservation, and smart cities. In addition, China and the EU should jointly work on the standards for environmental protection and green products.

Sun Yan is an associate research fellow from the Institute of European Studies at the Chinese Academy of Social Sciences.