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The European Union and China reached a trade and investment deal that provides European investors and companies greater access to Chinese markets.

Market observers suggested that the EU-China trade and investment deal, which Xi and the top European leaders agreed to "in principle" will probably anger the United States' incoming administration.

On Wednesday, Chinese President Xi Jinping and top EU officials including European Council President Charles Michel and European Commission President Ursula von der Leyen held a video conference regarding the EU-China trade and investment deaL.

German Chancellor Angela Merkel and French President Emmanuel Macron also participated in the negotiations with Pres. Xi.

They concluded their intense negotiations on the EU-China Comprehensive Agreement on Investment (CAI) after seven years. The deal "is of major economic significance and also binds the parties into a values-based investment relationship grounded in sustainable development principles," according to the European Union in a statement.

EU-China investment deal will level the playing field in Chinese markets for European investors

Additionally, the agreement will "help rebalance the trade and investment relationship between the EU and China." It will "significantly improve the level of playing field for EU investors" by clearly stipulating the obligations of Chinese state-owned companies, enhancing transparency, prohibiting forced technology transfers and other distortive practices. Therefore, European companies will be able to compete fairly in the Chinese market.

China also made commitments on ratifying the relevant International Labor Organization (ILO) rules related to forced labor, which is one of the

The deal is pending a ratification process conducted by the EU Council, which will go over the text of the deal with a fine-tooth comb.

Pres. Xi praised the EU leaders' willingness to take part in the negotiations, saying, they "rose to the challenge," even amid the global COVID-19 pandemic. In all, the deal is groundbreaking for the EU and China.

German auto manufacturers are particularly pleased as China's domestic automobile market will be further opened to Volkswagen, BMW, and Daimler. In addition, China will open up access to multiple sectors, including hybrid and electric vehicles, telecoms, cloud, and financial services, private hospitals, as well as international maritime and air transport.

Today‘s agreement is an important landmark in our relationship with China and for our values-based trade agenda. It will provide unprecedented access to the Chinese market for European investors, enabling our businesses to grow and create jobs. It will also commit China to ambitious principles on sustainability, transparency, and non-discrimination. The agreement will rebalance our economic relationship with China," said von der Leyen. 

A big win for China's efforts to achieve global economic expansion

On top of China granting access to lucrative domestic markets, the country has also agreed to make major investments in European firms, creating a tit-for-tat investment deal. If the deal were to be ratified by the EU Council, it would mark another huge victory in China's global economic expansion efforts.

On the other side of the Atlantic sits the U.S., which increasingly views China as a capable adversary that must be kept in check. Exactly how this deal will affect U.S. foreign and trade policy towards China remains to be seen.

Experts have argued the deal could throw a wrench into ongoing U.S. policy efforts against China, particularly those of the incoming Biden administration.

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