BEIJING, Jan. 29, 2021 /PRNewswire/ -- On December 30th, 2020, the European Commission confirmed The Comprehensive Agreement on Investment with China (CAI) in principle. EU-China CAI negotiations on the complex subject began nearly seven years ago. The CAI is one of the most significant and ambitious agreements that China has ever pursued with a foreign partner.
The cumulative foreign direct investment from China in the EU over the last 20 years was around 120 billion Euros, mostly in infrastructure projects, real estate, and high-tech businesses. EU investment into China over the same period was around 140bn Euros, much of that in the manufacturing sector.
With this agreement, the EU expects to strike a better balance in the EU-China trade relationship. Within it, China has committed to a higher level of access to its fast-growing 1.4 billion consumer market. The agreement aims to ensure a level playing field in China for European companies to compete on equal terms with domestic private and state-owned enterprises.
This is especially important news at the start of 2021 as the pandemic continues to negatively affect growth trends worldwide. By establishing freer access to sectors in need of investment to eager capital providers from across the world, the EU and China are taking an important step in the fight against the economic effects of the pandemic.
The CAI effects several sectors, liberalizing access by limiting or phasing out requirements for Joint Ventures, such as mandatory technology transfers and high government involvement in technology licensing.
EU companies in several sectors explicitly covered in the agreement will be likely to take advantage of the policies outlined in the agreement. This includes R&D in biological resources, international maritime transport, the automotive sector for new energy vehicles, and private health care.
The agreement may also lead to deeper cooperation between European and Chinese partners. I predict this agreement will not cause EU companies to abandon the need for local partnerships or JVs, but rather that such partnerships will be more balanced and transparent. The additional pressure of current travel restrictions due to the pandemic means that high-quality local partnerships will be increasingly important for any EU company planning successful operations in China.
At TOJOY, we enable EU companies to connect and reach agreements with such high-quality local partners, to access the funding, operations partnerships, and resources required to grow a business in China and take advantage of the policies outlined in the CAI. Our first TOJOY office in Europe was established in Paris in June of 2019 in part to serve many of the global investors looking to do business in Europe and China.
As this investment agreement strengthens economic relations between China and Europe, we expect business acceleration platforms such as TOJOY's to become increasingly important.
By leveraging these platforms to find reliable Chinese partners for capital raising and joint operations, European businesses can access the resources needed for a successful launch or rapid expansion in China. Chinese companies can also leverage such platforms to enter European markets and expand their business. Cooperation models for everything from commodities, to nationwide expansion projects, and even mergers and acquisitions can be created through such platforms.
China is and will remain one of the fastest growing markets. I believe European companies, if they are not already in China, will move their investments into China up on their agendas.
