Trump or not, the EU has no plans to revive 2020 investment deal with China

The EU is unwilling to resume the 2020 China investment deal despite diplomatic signals, focusing instead on trade imbalances and Beijing's industrial overcapacity

The European Union has categorically ruled out any revival of the stalled Comprehensive Agreement on Investment (CAI) with China, with a top EU official stating there is “absolutely no intention” to reinitiate negotiations, even as Beijing signals openness to rekindling economic ties.

 

Marjut Hannonen, head of trade at the EU delegation in Beijing, made the remarks during a panel discussion marking 50 years of diplomatic relations between the EU and China, reported the South China Morning Post (SCMP). Speaking at the EU-China forum on May 14, Hannonen said relations had “steadily deteriorated” over the past two decades, pointing to increasing market barriers and what the EU sees as unfair trade practices from China.

 

 

What is the Comprehensive Agreement on Investment between EU and China?

 

The CAI, finalised in 2020 but never officially signed, was once hailed as a landmark economic agreement to deepen investment flows between Brussels and Beijing. But the deal hit a deadlock in 2021 after the European Parliament froze it in response to retaliatory sanctions from China over the EU’s criticism of alleged human rights abuses in Xinjiang—claims that Beijing continues to deny.

 

Under the agreement, China had pledged to provide fairer treatment to European Union companies, enabling them to compete more equally within the Chinese market. The commitments included measures related to state-owned enterprises, greater transparency around subsidies, and safeguards against forced technology transfers.

 

China also accepted provisions on sustainable development, including commitments addressing climate change and the issue of forced labour.

 

Additionally, both parties agreed to continue negotiations on investment protection and dispute resolution, with a target to conclude these discussions within two years of the agreement’s signing.

 

China’s quiet lobbying for CAI restart met with EU resistance

 

Since the deal fell through, Chinese officials have lobbied quietly to restart the dialogue, including overtures from Fu Cong, China’s former ambassador to the EU. Last month, China lifted sanctions on five Members of the European Parliament and the subcommittee on human rights—a move widely seen as an olive branch.

 

Yet EU officials remain unconvinced.

 

“We have quite some issues with China to address,” Hannonen noted, urging focus on existing trade barriers, market access limitations, and industrial overcapacity rather than revisiting the shelved investment pact.

 

EU flags Chinese overcapacity in EVs, solar and steel as major concern

 

Among the most pressing concerns voiced by the EU is China’s industrial overcapacity, particularly in sectors such as electric vehicles (EVs), steel, and solar panels. European leaders argue that state subsidies in China allow firms to export products at artificially low prices, undercutting local industries and creating a growing trade imbalance.

 

“The overcapacity problem is huge, it’s growing, it’s massive and it goes across the sectors,” Hannonen said, according to SCMP. “On the other hand, they are just doubling down on more manufacturing capacity.”

 

The EU has already responded with defensive trade measures. In 2024, Brussels imposed significant tariffs on Chinese-made EVs, citing anti-subsidy concerns. Beijing retaliated with countermeasures, escalating trade tensions further.

 

However, in an attempt to ease the ongoing friction, a new proposal has reportedly emerged where China would set a floor price on EV exports to Europe in return for a softening of EU duties. The deal could also involve Chinese investment in the European EV supply chain, creating local jobs and facilitating technology transfer, according to EU sources quoted in the report.

 

EU caught between US pressure under Trump and Chinese diplomacy

 

The EU’s strategies are further complicated by its positioning between the United States under Donald Trump and China, two rival powers increasingly locked in economic and technological competition.

 

According to diplomats cited by the South China Morning Post, the EU faces a “high-wire act” in balancing its interests. While Washington has urged allies to decouple from Chinese supply chains, Europe fears being left isolated if Beijing and Washington strike a bilateral breakthrough.

 

Although Beijing recently lifted sanctions on some EU lawmakers, others—including researchers and diplomats—remain blacklisted. The partial rollback has not restored trust.