In the coming months, the progress of the economic negotiations on a global agreement on investment and geographical indications will provide the European Union with an opportunity to assess China's commitment.
In mid-November, a 24th round of negotiations will be held to seal a bilateral investment treaty between the EU and China. In the previous round, at the end of September, discussions advanced on disciplines related to financial services, capital movements and national treatment commitments, according to a Commission report.
They are still struggling to resolve disputes between States or on sustainable development issues - perceived on the Chinese side as part and parcel of China's own political system.
"The bilateral talks on an investment treaty between the EU are China are progressing well", a Chinese diplomat told a small group of European journalists on 21 October.
He stressed that, for Beijing, the commitments made at the EU-China Summit on 9 April 2019 enshrined their determination to make "decisive" progress by the end of 2019 in order to seal an "ambitious" agreement in 2020 (see EUROPE 12232/7, 12230/13). This agreement is at the heart of the EU-China 2020 strategic cooperation programme.
In April, the parties also agreed to close the agreement on geographical indications before the end of 2019 (see EUROPE 12300/21).
The end of naivety
While optimism prevails on the Chinese side, the picture is different on the European side.
Until recently, EU Trade Commissioner Cecilia Malmström had been deploring the lack of progress in these talks, which have been underway for almost 6 years.
2019 will however mark a turning point in Sino-European relations. Faced with a China that continues to benefit greatly from European openness, without ensuring reciprocity or questioning its model of state capitalism, the Union no longer intends to play the role of "naïve" commercial power, as revealed in the Commission's Communication on China in March (see EUROPE 12212/20).
This document also reveals that Europe is aware "that the relationship with China can no longer be managed fairly within the framework of the application of the Rule", as Sébastien Jean (CEPII) put it in June.
Change the rules
If the application of the Rule, which Europe holds so dear, is no longer sufficient, it is also because the WTO rules are unclear and because Beijing and its key trading partners differ in their interpretation.
Thus, China continues to claim that its subsidies do not violate multilateral trade rules under any circumstances. "We are a developing country, absolute reciprocity is not possible", said a senior Chinese official.
Nevertheless, discussions to reform the organization are struggling to produce concrete results and to induce China to take a broader responsibility in this debate.
Increased firmness
Frustrated at not getting the expected response to their increased demand for reciprocity and concerned about the role of Chinese state-owned enterprises in their foreign direct investment (FDI), the Union is therefore pursuing a more aggressive strategy towards Beijing, in parallel to these talks.
For example, in seeking to control FDI in the EU through the investment screening mechanism. By the end of July, 15 Member States had notified the Commission of various types of such mechanisms. Beijing is concerned about this: "China has its own concerns about investment openness in the EU. Initiatives, such as the investment screening mechanism, are undermining the EU's attractiveness for Chinese investments", the same diplomat warned.
And he highlighted the 80% drop in Chinese FDI in the first half of 2019 (a slowdown, however, in line with a global decline in Chinese outward FDI, according to the Rhodium Group). European figures show a similar decline over the same period.
The European treasuries have also agreed to look again at the development of an investment procurement instrument ('IPI') (see EUROPE 12220/1), in order to give themselves new leverage.
Meanwhile, on 21 October, Beijing submitted its seventh offer with a view to joining the WTO Plurilateral Agreement on Government Procurement. According to the Ministry of Finance, this would be the first time that the military sector would be included.
In any case, China is backed into a corner: it must now demonstrate its commitment to its European partner, in their bilateral negotiations or at the WTO mini-ministerial in Shanghai in November 2019. (Original version in French by Hermine Donceel)