China-EU investment treaty "definitely a win-win," says expert

PARIS, Dec. 30 (Xinhua) — As Chinese and European leaders on Wednesday announced the completion of investment agreement negotiations as scheduled, the treaty is “definitely a win-win,” an expert has said.

It is “definitely a win-win” between the two economies that are reliant on each other not only for trade, but increasingly so for investment, said Margit Molnar, head of the China Desk at Economics Department of the Paris-based Organization for Economic Cooperation and Development.

For China, an ever greater overseas investor, the European Union (EU) is becoming an increasingly important destination, the economist said.

“This investment treaty, which has reciprocity as a basic principle, will create a more welcoming environment for Chinese investors in the EU,” and EU firms will face a level playing field in China, she said.

After the talk was sealed, China’s Ministry of Commerce said Wednesday that the treaty will bring more investment opportunities for companies from both sides and provide better business environment by making high-level market access commitments and adopting high-level fair competition rules.

“Greater transparency on subsidies will also open up markets for Chinese firms, if markets are assured that competitiveness is not because of subsidies,” said Molnar.

“Furthermore, some of the opening measures in the Chinese market will create efficiency-enhancing competition and bring know-how,” she said, noting that foreign-invested private hospitals, for example, can shorten queuing time in public hospitals and raise salaries of medical staff.

As for EU firms, Molnar expressed confidence that the treaty will help them cement their positions in the Chinese market as “they will no longer face the joint-venture requirement in a number of industries, including advertising, real estate, environmental services, private hospitals and the automotive sector.”

Moreover, the expert noted, the two major global players’ commitment to making investment in each other easier will bring benefits to other economies through multiple channels.

“Falling barriers to investment reduce transaction costs and enhance efficiency, while more foreign direct investment will enhance competition, again, raising efficiency in markets, benefitting also consumers and leading to stronger growth,” said Molnar. “Third countries will thus benefit from the enlarged markets.”

“Part of the content of the treaty is related to manufacturing, including the automotive sector, which is highly spliced up into many segments in multiple locations along global value chains. Participants in those value chains will thus benefit from increased production,” she said.

Highlighting the recent liberalization wave in the area of foreign direct investment in China, Molnar said the investment treaty will be an additional step in that direction, “exclusively for EU companies, which will thus have a competitive edge in the Chinese market.”

“This may trigger another wave of treaties if other competitors wish to receive the same treatment,” she said.

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