China, EU begin negotiations on investment pact

BEIJING (AFP) - China and the European Union began talks on a landmark investment agreement on Thursday, the EU's president said, a positive move amid lingering trade tensions between the two sides.

"We have made a substantial step forward today by launching negotiations on an investment agreement, covering both investment protection and market access," said Herman Van Rompuy, President of the European Council.

"Both the EU and China believe that it is the right time to go ahead," he said at the Great Hall of the People in Beijing after a China-EU summit.

Van Rompuy said that the accord would help boost investment flows.

"Our bilateral investment flows are still far too low, given the level of integration taking place between our economies. This agreement will achieve more two-way investments between the EU and China."

China is the world's second-largest economy and the relationship between the two, while sometimes troubled, is hugely important for world trade.

The 28-nation EU is China's largest trading partner, and China is the EU's second biggest. Trade between the two amounted to US$546 billion (S$679 billion) in 2012, according to Chinese Customs data, with China enjoying a significant surplus.

China was represented at the meeting by Premier Li Keqiang, who called the talks "friendly, candid, in-depth and broad".

He said the two sides "reached important consensus on how to further deepen China and the EU's comprehensive strategic partnership in the future".

He added: "The meeting, it could be said, was rich in achievements."

The start of the investment talks comes after the EU last month agreed a negotiating mandate for talks on an investment protection accord, aiming to bolster legal certainty for European firms in China and boost their access to its market.

But an investment protection accord falls well short of the extensive free trade agreements Brussels is negotiating with other major partners such as the United States.

The EU is reluctant to go that far while the Chinese government retains such a major role in the country's economy.

Beijing and Brussels have locked horns over a string of commercial issues this year, including at the World Trade Organisation. Disputes have ranged from solar panels to nuts and bolts.

The two sides reached agreement to avoid a trade war over cheap imports of Chinese solar panels, but other disputes, including on Chinese rare earth minerals, are still simmering.