European Commission Executive Vice President Valdis Dombrovskis confirms that progress on the investment deal with China has stalled following March sanctions.

The EU concluded what Dombrovskis describes as an “asymmetric deal” with China at the end of last year. Known as the Comprehensive Agreement on Investment (CAI), it was presented on 30 December. 

Today (5 May) he said: ”There are substantially more new commitments from China as regards market access, with regards to the level playing field and this is something that European companies have been asking us for for many years. So as regards the agreement itself, that technical work is ongoing to prepare the ground for ratification.”

At the time of the agreement Dombrovskis said: “This deal will give European businesses a major boost in one of the world's biggest and fastest-growing markets, helping them to operate and compete in China. It also anchors our values-based trade agenda with one of our largest trading partners. We have secured binding commitments on the environment, climate change and combatting forced labour. We will engage closely with China to ensure that all commitments are honoured fully.”

Wider political context

When asked about whether the deal had been suspended, Dombrovskis said that the position of the European Commission has not changed. He said that the “ratification process of comprehensive agreement on investment cannot be separated from the wider political context. I will repeat that the ratification process cannot be separated from evolving dynamics of the wider EU-China relationship. And in this context, Chinese sanctions targeting among others members of European Parliament and even an entire parliamentary subcommittee are unacceptable and regrettable, and prospects and next steps concerning ratification on comprehensive agreement of investment will depend on how the situation evolves.”

The Commission faced much criticism when the agreement was reached, by appearing to move ahead of the United States, before the new administration had taken office. It was felt by some that the EU should wait to see if there was the possibility of finding common cause with the new Biden team. 

There were also accusations that the EU was ignoring China’s human rights record, particularly in relation to the treatment of the Uyghur muslim population in Xianjang province and the crackdown on the democracy protesters and the introduction of the national security law in Hong Kong.

Britain on Tuesday (4 May) sought to agree decisive action from G7 partners to protect democracies against global threats like those posed by China and Russia.

Hosting the second day of a foreign ministers' meeting in London designed to lay the groundwork for a leaders' summit in June, Dominic Raab (pictured) will lead talks among the Group of Seven wealthy nations on threats to democracy, freedoms and human rights.

"The UK’s presidency of the G7 is an opportunity to bring together open, democratic societies and demonstrate unity at a time when it is much needed to tackle shared challenges and rising threats," Raab said in a statement.

In addition to the G7 members Canada, France, Germany, Italy, Japan and the United States, Britain has also invited ministers from Australia, India, South Africa and South Korea this week.

Their first face-to-face meeting in two years is seen by Britain as a chance to reinforce support for the rules-based international system at a time when it says China's economic influence and Russian malign activity threaten to undermine it.

On Monday (3 May), having met with Raab, US Secretary of State Antony Blinken said there was a need to try to forge a global alliance of freedom loving countries, though stressed he did not want to hold China down, but make sure it played by the rules. Read more

Tuesday's discussion also covered the coup in Myanmar, urging stronger action against the military junta in the form of expanded sanctions, support for arms embargoes and more humanitarian assistance.

In the afternoon talks will turn to Russia, including how to respond to a troop manoeuvres on the border with Ukraine and the imprisonment of Kremlin critic Alexei Navalny.

Raab said on Sunday he wanted the G7 to consider a joint rebuttal unit to tackle Russian disinformation and propaganda. Read more

The European Union needs to engage with China despite many differences instead of opting for a more isolationist approach, Germany said on Wednesday (21 April).

"In the EU, we have been describing China as a partner, competitor and systemic rival at the same time," German Foreign Minister Heiko Maas (pictured) said ahead of a virtual meeting with his Chinese counterpart Wang Yi.

"In all these three dimensions we need strong, sustainable communication channels with Beijing. De-coupling is the wrong way to go."

Berlin's warning against de-coupling is in line with Beijing's long-held position against disengagement among nations, including with China, despite mutual differences.

Last month, China was hit by a round of coordinated sanctions from the United States, European Union, Britain and Canada over reports of forced labour in the far western Chinese region of Xinjiang, accusations that Beijing rejects.

Ties between China and Germany have generally remained stable since last year, Chinese State Councilor and Foreign Minister Wang Yi said later in his meeting with Maas.

Wang also said major economies like China and Germany should jointly resist any de-coupling, and instead seek to uphold the stability of global industrial and supply chains, according to a statement from the Chinese foreign ministry.

At the same time, China does not approve of any re-drawing of ideological lines, and is even more opposed to engaging in “small cliques”, and even arbitrarily imposing unilateral sanctions based on false information, Wang said.

Last week, U.S. President Joe Biden met with Japanese Prime Minister Yoshihide Suga in his first face-to-face White House summit since taking office, where both leaders said they shared serious concerns about the human rights situation in Hong Kong and Xinjiang.

In a show of economic cooperation to the exclusion of China, Biden said Japan and the United States would jointly invest in the tech sector including semiconductor supply chains.