Amid the escalating confrontation with the US in trade issues, China is reaching out to other important trade
partners such as EU and Japan to defend against the aggressive US. In the recently concluded annual China-EU
summit held in Beijing in July, the leaders from China and the EU agreed to push forward bilateral cooperation on a
number of areas including trade, investment, intellectual property protection, policy response to climate change etc.
More importantly, it is reported that both sides have agreed to put the negotiations of Bilateral Investment Treaty as
a priority. Our report analyzes the current situation of the China-EU bilateral investment and investigates the
contents and difficulties of BIT negotiations. We expect that the BIT between China and the EU will be a gamechanger
weapon to help China to end its trade war with the US. Moreover, it will also catalyze structural reforms in
China and boost its domestic growth.
The current situation of China-EU bilateral investment
China and EU have been cooperating in various economic fields in the past decades. The EU has been the largest
trade partner with China for the past consecutive 14 years and China has long been the EU’s second largest trade
partner. Although both sides have a lot of achievements in bilateral trade, bilateral investment seems to be lagged
behind.
Till March 2018, the accumulative investment of the EU to China is USD 121.9 billion, while China’s investment to
EU is USD 80.6 billion, taking only around 4% to the EU’s total outward investment stock and 2% of EU’s reception
of foreign investment, respectively. This suggests that it is still a lot of potential to promote the bilateral investment.
(Chart 1) Among the EU countries, Netherland, Germany and UK are the top three countries that invested most in
China based on the 2017 data. (Chart 2)
From China’s perspective, based on the CGIT data, 53.4% of China’s outward direct investment went to the Europe
in 2017, compared with 18.8% in Asia and 16% in the North America. (Chart 3) In particular, China’s investors are
concentrating to invest in the manufacturing, wholesale and retail trade, leasing and commercial service, most of
which are the medium-to-low-end sectors at the current stage. (Chart 4)