EU Hails Breakthrough With China on Industry Subsidies

April 9, 2019 Updated: April 9, 2019

BRUSSELS—Chinese Premier Li Keqiang promised the European Union on April 9 that Beijing would no longer force foreign companies to share sensitive know-how when operating in China and was ready to discuss new global trading rules on industrial subsidies.

Marking a significant shift, Li’s pledge at the annual EU-China leaders’ meeting follows similar offers to the United States and potentially signals an opening for which European companies have long lobbied.

China faced a more assertive Europe, even with dialogue the preferred approach.

China’s acquiescence to a seven-page communique followed months of intense European diplomacy against the backdrop of U.S. trade talks with China and what French President Emmanuel Macron called “an end to naivety” about Chinese power.

Many European governments have felt frustration at what they say is China’s failure to keep its promise to open up, and their leaders held a summit in March to discuss China for the first time in many years.

Highlighting the differences over trade and investment with Beijing, EU negotiations with China on a final summit communique, a guide to future policy, dragged on for 10 days before the April 9 gathering, which also included European Commission President Jean-Claude Juncker.

EU officials accused Beijing of wanting merely a “feel-good” summit, while Brussels sought to show a common front and address growing concerns over Chinese state-led enterprises and their acquisition of key European assets.

Li will now head to Croatia for another European summit on April 11 and 12, this time with central and eastern states, 11 of whom are EU members.

Investment Part, Rights Issues

The joint statement, only agreed by Li on his plane before his arrival in Brussels, said that the EU and China would cooperate on reform of the World Trade Organization and intensify discussions on rules governing industrial subsidies.

“It is a breakthrough. For the first time, China has agreed to engage with Europe on this key priority for WTO reform,” summit chair Donald Tusk said.

The two sides additionally agreed there should be no forced transfer of technologies as a price for investment.

Western governments have long complained that their companies are pressured into handing over technological know-how to Chinese joint-venture partners, officials or regulators as a condition for doing business in China.

That technology is often subsequently used by Chinese competitors, undercutting Western companies, says the European Union, which fears Chinese dominance in strategic industries.

China and the EU have also set a goal of concluding an investment pact in 2020. Launched in 2013 and with a 20th round of talks held in February, it aims to improve market access and end discrimination against foreign investors.

In a private meeting, Tusk also raised with Li the incarceration of what the West says are hundreds of thousands of Muslims in China’s western Xinjiang region, EU diplomats said.

U.N. experts say Chinese detention centers hold more than one million ethnic Uighurs and other Muslims. Tusk also raised human rights more generally in the main summit plenary, seeking more religious freedom for minority groups in China.

 

By Philip Blenkinsop & Robin Emmott

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