BEIJING/BRUSSELS (BLOOMBERG) - Europe's top business association pulled out of a meeting with a Beijing think tank after the Chinese side opposed the participation of two perceived China critics, a person familiar with the event said.

The incident, which happened last month but only came to light now, casts a shadow over negotiations between China and the European Union on a major investment agreement as they enter their final stretch.

The meeting between BusinessEurope and the China Centre for International Economic Exchanges, which is affiliated with China's top planning agency, the National Development and Reform Commission, was supposed to take place via weblink. It was cancelled by the European side when the CCIEE asked that two participants not be allowed to take part, the person said. Dow Jones reported the cancellation earlier.

Beijing and Brussels are working to conclude a Comprehensive Agreement on Investment aimed at building on bilateral trade worth some US$650 billion (S$868.6 billion) last year. European and Chinese negotiators have said they want to conclude the deal by the end of this year, yet the talks that began in 2013 have been drawn out over provisions to open up China's market and eliminate what the EU sees as discriminatory practices.

Labour rights

While significant progress toward the agreement has been achieved in the latter part of this year, some are doubtful that a deal can be achieved in that timeframe given the gaps that remain.

In particular, the EU is seeking commitments from China on sustainable development topics including labour issues, and this is considered to be a major sticking point, according to another person familiar with those discussions.

The November meeting between BusinessEurope and the CCIEE has no direct bearing on the investment agreement negotiations, yet the incident underscored just how difficult it is to be in dialogue with China, the first person said.

It comes as the EU is turning more critical of China on matters from a crackdown in its mainly Muslim Xinjiang region, its increasing militarisation of the South China Sea, and its introduction of a national security law for Hong Kong that's curtailed freedoms in the former British territory.

The bloc is also reaching out to the incoming administration of President-elect Joe Biden, threatening to further isolate China.

The Chinese side opposed the participation in the meeting of Reinhard Buetikofer, a German Green party member of the European Parliament who chairs the delegation for relations with China, and Mikko Huotari, executive director of the Berlin-based Mercator Institute for China Studies, the person familiar said. Buetikofer regularly speaks out against Beijing on human rights issues and Hong Kong.

Closed doors

Emails to both people sent early Thursday went unanswered. BusinessEurope, an umbrella group for the bloc's main industry lobbies, said that the closed-door dialogues usually involve about 40 participants including company executives and representatives of think tanks for an "open discussion" of topics relevant to EU-China relations.

"Regrettably this year's dialogue foreseen to take place virtually the 24 November had to be cancelled," spokesman Peter Sennekamp said in an email. BusinessEurope expects to hold the event again next year, he said.

The CCIEE, which is headed by Zeng Peiyan, a former Chinese vice premier, didn't immediately respond when asked to comment. China's Foreign Ministry also didn't respond to a request for comment sent after business hours.

"We very much respect BusinessEurope's decision to not hold the dialogue this year," Huotari told Dow Jones.