The Political Economy of the EU-China Comprehensive Agreement on Investment: Balancing the European Union’s Economic Interests

The EU’s pursuit of the CAI with China was based on economic interest. Since the initiation of formal relations between the EEC and China in 1975, economic interest has been the core of EU policy, and as EU policy documents make clear, the penetration of the market in China by European companies has been a central goal of the EU. In its initial period the EU-China relationship was dominated by trade, both in terms of policy and real economic exchanges. In the 2010s investment moved to the top of the EU agenda, and the EU became the demandeur for the CAI. In the EU’s view, the relationship with China, including FDI, was unbalanced in favour of the latter. The relationship required rebalancing through what the EU called reciprocity and a level playing field. The CAI was a tool through which the imbalance between the open EU investment regime and the restrictive Chinese regime could be altered in favour of the interests of EU companies. However, this view of the lack of reciprocity in the EU-China relationship does not explain the EU’s pursuit of the CAI, which must be understood in a wider context of political economy. The centring of FDI in EU policy occurred following the crisis of 2008 in which China became the driver of global economic growth while the EU economy stagnated. While on the surface investment between the EU and China was small, EU investment in China became increasingly important to European economies and companies. Rather than being driven by the exclusion of EU FDI in China, the EU pursuit of the CAI was driven by increasing dependence of EU economies and companies on investment in China. However, the penetration of the market in China was not equally distributed among EU member states, with some benefitting much more than others.