The European Union has been determined to achieve a level playing field in economic relations with each of its trading partners. Given China's growing importance on the international scene, European companies' trade with and investments in China has risen exponentially over the years, especially since China's entry into the World Trade Organization in 2001.

Since 2013, China has been the world's largest trading nation and the second-biggest consumer nation in the world. It is now the EU's second-largest trading partner (after the United States), while the EU is China's biggest trading partner. Under the leadership of Xi Jinping, China is striving to modernize its economy by liberalizing government-controlled areas - the upcoming liberalization of interest rates, authorization for private banks to be owned entirely by private investors and the contribution of Internet financial services to free up the financial market are just some examples.

Still, investment flows show untapped potential. Although bilateral trade in 2012 accounted for almost 1 billion euros ($1.1 billion) a day, Chinese investments into the EU represented only 2.6 percent of total FDI flows into the EU.

The recent settlements to disputes between the EU and China in the solar panel and wine industries show a willingness on both sides to strengthen relations. The wine industry agreement includes a pledge by the European wine industry to help China develop its domestic wine production and helping the nation better understand the EU wine market. In return, China will organize tastings of European wine in China.

Twenty-six EU member states have already signed individual bilateral investment treaties with the world's second-biggest economy in an aim to lower protectionist measures that often prevent European companies from fairly competing in the Chinese market. Since the 2009 Treaty of Lisbon granted the EU the exclusive rights to negotiate new investment treaties, the union has had the opportunity to negotiate an overarching agreement that would replace the 26 existing BITs. The idea of such an agreement emerged in 2010 and China and the EU wrapped up their fourth round of negotiations in January.

Over the past few years, China has adopted a different economic strategy worldwide, shifting from "ordinary" pacts that focus on trade in goods - primarily with Asian countries - to deals involving investment and trade in services. Both the BIT with the EU and the proposed talks on a Free Trade Area for the Asia-Pacific are signals of this change, likely triggered by two key trade agreements involving the US that will introduce new norms to the global economy: the Trans-Pacific Partnership and The Transatlantic Trade and Investment Partnership.

In a globalized environment where a growing number of international challenges are addressed with "soft" instruments, such as decrees or joint plans of action, it is up to mega/multi-regional trade and investment agreements to establish global standards for the future.

China is ready to take on high-quality commitments and shake off its "non-market economy" status, although considerable concern remains over China's compliance with its WTO obligations and international trade rules generally. After the fourth round of BIT negotiations, European Commissioner Cecilia Malmstrom called for China to ensure that a pair of closely watched negotiations - expansion of the WTO's Information Technology Agreement and Environmental Goods Agreement - are brought to fruition within the WTO framework.

The EU is going to pursue an ambitious BIT that not only involves a high level of investment protection, but also market access, removals of transfer of technology requirements and a more transparent and predictable market. This treaty can serve both parties as a crucial stepping stone toward better economic and cultural understanding and hopefully further more agreements.

The author is a member of the European Parliament and vice-chair of the Committee on Economic and Monetary Affairs. The views do not necessarily reflect those of China Daily.