European Union Freezes China Investment Deal Over Sanctions Spat

(Bloomberg) -- The European Union signaled it won’t ratify an investment agreement with China as long as its officials are sanctioned in a clash with Beijing over alleged human rights abuses, as the bloc set out strategies to counter state-funded Chinese takeovers.

“The ratification process cannot be separated from the evolving dynamics of the wider EU-China relationship,” Valdis Dombrovskis, the bloc’s trade chief, told reporters on Wednesday, calling China’s retaliatory sanctions against officials including members of the European Parliament “unacceptable and regrettable.”

The next steps in the ratification of the Comprehensive Agreement on Investment will “depend on how the situation evolves,” Dombrovskis said. The EU imposed sanctions in March that targeted four Chinese nationals and one entity over alleged abuses on the Uyghurs in Xinjiang, which led to Beijing responding with its own sanctions.

Read More: EU, China Give Political Nod to Market-Opening Investment Pact

Also on Wednesday, the European Commission set out strategies to resist state-funded Chinese takeovers and repatriate the production of semiconductors, just as the U.S. seeks to persuade the world’s biggest economies to harden their stance against Beijing. The overlapping initiatives targeting China are part of a plan to ensure the EU has more control over its future, in a so-called “strategic autonomy” push.

Read More: Europe’s Contested Deal With China Sends Warning to Joe Biden

These are the latest drives that will shape EU relations with China:

Foreign State Aid

Chip Production

G-7 Coordination

India Trade Talks

• Envoys in Brussels are discussing a draft joint statement between the EU and India announcing the resumption of free-trade talks. Commission President Ursula von der Leyen described China’s regional rival as a “democratic partner” this month following a call with Prime Minister Narendra Modi. Vestager on Tuesday described China, in contrast, as a “systemic rival.” The statement is due to be issued by EU and Indian leaders after a virtual meeting on Saturday.

Human Rights in Hong Kong

• EU officials are discussing a ministerial statement for next week lambasting China over alleged human rights violations in Hong Kong.

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