EU wants faster China action on investment agreement and steel cuts

European Commission Vice President Jyrki Katainen says he will take up the thorny issues directly with Vice Premier Ma Kai

PUBLISHED : Monday, 15 May, 2017, 2:30pm
UPDATED : Tuesday, 16 May, 2017, 2:33am

The European Union is actively pushing China to speed up talks over an investment agreement, and to take concrete action to cut its huge overcapacity in steel, according to European Commission Vice President Jyrki Katainen.

In an interview with the South China Morning Post on the sidelines of the Belt and Road Forum in Beijing on Sunday, Katainen said he will be taking up the two issues directly when he meets China’s Vice Premier Ma Kai on Monday, ahead of the annual EU-China Summit due to be held in Brussels in early June.

“When President Xi said clearly several times that China favours free trade and wants to take concrete steps toward more opening up for investment, we want to believe Chinese authorities and the president are serious about the issue, and we expect this will move the negotiations forward and we will get results in the near future,” he said.

“We have agreed to exchange concrete offers to move the negotiations forward as soon as possible ... An agreement would be a strong political signal to the world that two big trading blocs, the EU and China, are really doing something concrete and tangible in order to integrate better. It is the way to write global rules and harness globalisation.”

Why China is investing heavily in Europe

Talks on an investment treaty started three years ago, but the negotiations have not achieved any milestones while EU businesses are increasingly discontent that they have limited market access in China while Chinese entities have almost no restrictions on buying EU assets.

Beijing dropped a line about pushing forward the talks in this year’s government work report, raising concerns among EU business.

“We are happy to get Chinese investment in Europe because it is very important for economic growth, job creation and competitiveness. But it would be fair to have the same rights for European companies in China. That is why we are pushing the investment agreement strongly,” Katainen said.

Chinese observers meanwhile said Brussels has quietly softened its attitude over Beijing’s increasing reach in Central and Eastern Europe.

Katainen said Chinese investment is welcome anywhere in the EU, but must abide by EU law, citing the case of a Beijing-funded high-speed railway project connecting Belgrade, capital of Serbia, and Budapest in Hungary, which is under investigation for possible violations of transparency requirements in public tenders.

“We have asked for information from the parties and we haven’t concluded yet,” Katainen said.

Currently, economic diplomacy is conducted largely through the China-EU connectivity platform, which Katainen said offered a practical way to share interests in infrastructure construction.

Speaking last week, Joerg Wuttke, former president of the European Union Chamber of Commerce in China, also said an investment agreement was the top priority.

“For us, connectivity between the EU and China is an investment agreement. EU businesses are eagerly waiting for something… We need something substantial in writing [on market opening], not warm words or nice gestures. We need something like the WTO,” Wuttke said.

Berlin uneasy about Beijing’s growing clout in eastern, southern Europe

On the question of steel, Katainen said the EU wanted to see more progress.

“The EU and China agreed a year ago to set up a joint forum [on overcapacity], but it has not happened yet. This is an important issue for EU because we have to implement what we have decided together,” he said.

He said China’s reduction of overcapacity had been just temporary and “the latest data show [China’s] steel production even increased a bit”.

The issue has been a thorny one in China-EU relations for some time. The amount of steel overcapacity in China has been estimated to be twice the EU’s total production, and European steel industry associations have been harshly critical of EU leaders’ handling of the issue.

China serious in slashing steel capacity but excess production still coming down the road

Last year China and the EU agreed to set up a joint team to study China’s steel trade data and monitor its progress in retiring overcapacity. However, progress has been slow.

Katainen agreed with China’s view that steel overcapacity is a global issue, but he hoped China could follow other countries in providing sufficient information on overcapacity and production figures.

“It is understandable that it’s very difficult, politically and socially, to address steel overcapacity, [and it may lead to] job losses and factory closures. But the problem won’t disappear if nothing is done,” he said.

“In the past two to three years our bilateral relationship has intensified and covers more areas than before. There are also more challenges, but it is natural,” he said, adding that he can talk about the issues with Ma Kai frankly “without extensive diplomatic language.”