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July 31, 2014
The recently announced plans for a free trade agreement between China and the EU are momentous. China is the EU’s No. 1 supplier of goods and its third-largest export market. In turn, the EU is China’s largest trading partner. Going by current trends, EU-China annual bilateral trade could grow close to 1.5 times in a decade’s time. Not only goods but also services trade has large potential to grow. Chinese investment into the EU is still in its infancy but is likely to increase and become more broad-based, covering a wider range of industries and countries across Europe. New dynamism is expected from a bilateral investment agreement currently in negotiation and rising interest of Chinese investors in European companies, as shown by our compilation of Chinese M&A deals vis-à-vis the EU and Germany. Plenty of headroom exists for greater use of RMB in bilateral trade and investment relations. A note of caution concerns the risk of trade disputes which is unlikely to be removed in the near term. [more]