Beijing is ready for new investments in the Central and Southeast Europe (CSE), as it was confirmed during the 16 plus 1 summit in Sofia, Bulgaria.
In March 2018, Reuters announced that China is considering whether to minimize a groupwide visit with the Bulgarian, Croatian, Czech, Estonian, Hungarian, Latvian, Lithuanian, Polish, Romanian, Slovak, Slovenian, Albanian, Macedonian, Bosnian and Serbian leaders. Beijing and CSE officials held their the first summit of 16+1 group in the wake of the global financial crisis in Budapest in 2011. The one held in Bulgaria was the 7th summit of 16 plus 1 group.
“We are ready to encourage Chinese companies to invest more in Bulgaria, and the whole CSE. We are working together in this process. The cooperation of China with 16 countries in this part of Europe and the relations between China and the EU are not mutually exclusive but contribute to the strengthening of European integration,” said Chinese chief of diplomacy Wang Yi.
Beijing believes that the July summit will increase the mutual co-operation of China with the CSE. “China remains open for trade with foreign partners and can only benefit from an economically strong Europe,” said the Chinese Prime Minister Li Keqiang. He added that China would continue opening its markets and implementing other reforms that had fueled its economy, providing opportunities for EU members and aspirants in the bloc’s poorer half.
Ekaterina Zakharieva, Bulgarian foreign minister, said before the summit that “[Bulgarian] Prime Minister Borisov is personally dedicated to seeking and finding funding sources for these projects in the Balkans. We are a bridge between Europe and Asia. I believe that summit of 16 July in Sofia will contribute significantly to the development of the region”, emphasized Bulgaria’s chief of diplomacy.
European Union is afraid of China
However, the whole process may benefit more the non-EU members, as EU Parliament is taking steps to counter the Chinese trade breakthrough. MEPs are close to harmonizing a directive proposal extending the powers of the European Commission to investigate foreign investment in the context of an increasing concern over Chinese acquisitions in Europe. The EP Committee on International Trade is discussing about 450 amendments to the procedure proposal for a directive that the EC sent in the last year and could soon complete its own proposal. The committee’s proposal will be stricter than that of the Commission in several aspects, officials say—it will expand the list of vulnerable sectors and will oblige Brussels to analyze suspicious investments. MEPs also offer a much wider definition of important infrastructure and technologies that can activate the tracking process. To the list are thus added media, ports, automotive sector and electoral infrastructure.
The importance of protecting EU citizens’ personal data is also underlined, and the focus on investments that may be spent under state influence is heightened, causing fears that Chinese companies buy European competitors as part of an industrial strategy designed under the Beijing rules. Still, although the proposed directive would give the Commission the right to issue opinions and gather information on investments from member countries, the final decision on approval or blockade would be made by member states themselves.
Chinese investments in Europe
According to the Bloomberg estimates, only in the last 10 years, China has invested about USD318bn in the European Union. But while any investment in Europe was welcomed during the crisis, the EU is now seriously considering the tightening of conditions for Chinese state-owned companies. More than that, many speculate that “aggressive” Chinese investments aim to strengthen their political influence and create disunity within the EU. It is questionable though if China indeed has such power. With investments and capital, geopolitical interests are always going along, no matter the fact that the capital naturally looks for growth and higher profit rate. But when one considers the Chinese capital invested in the United States, most of it goes to bonds with the highest rating, which means with the highest level of security and the lowest profit rate. So, it’s not always a “one way road”. As far as investment in Europe is concerned, Chinese investments do not yet have such a potential to cause discrepancy or conflict. And that discrepancy arises because of differences in opinions. While “old Europe”, at least in their political elite, is a bit afraid of Chinese investments, a number of countries from South Europe, from Portugal, Spain, Italy, Croatia, to Greece and Bulgaria cannot afford such luxury.
However, the available data underestimate the actual size and scope of Chinese ambitions in Europe. It should be noted that they do not include 355 mergers of companies, investments and joint ventures—for which the terms under which they have been agreed are not disclosed. Bloomberg estimates that there are about a dozen high-profile contracts whose final data have not been published, suggesting an additional total value of Chinese investments of USD13.3bn. No data on investment in construction on agricultural land nor the operations on the stock market in the total amount of at least USD40bn were published, according to researchers at the American Enterprise Institute and the European Council for Foreign Policy. Also, data on the estimated USD9bn invested in the German “Daimler” by the Zhejiang Gili Holding Group has not been released.
The periphery of the EU is where China has made some of its biggest infrastructure performances, such as the construction of the Pelješac Bridge in Croatia, and is also interested in the Belgrade-Budapest railway line construction. The strategically important Pelješac Bridge, which unites the southern Croatian county with the rest of country, will be built by the Chinese consortium China Road and Bridge Corporation. This is among the first larger Chinese investments in Croatia, which raises hopes after the numerous talks about Chinese contributions were named as mysterious as Yeti.
Elsewhere, Greece is the “gateway of China to Europe” according to what the Chinese Prime Minister Li Keqiang said in 2014. China has invested more than EUR7bn in Greece, and this is not the end. An example of such an investment is a controversial selling of the Piraeus port to the Chinese company Cosco in 2016. Cosco will make this port the largest in the Mediterranean, and the turnover of goods has already increased considerably thanks to deliveries from China. Logistics centers and warehouses are emerging around the port—and so are new jobs for Greeks. And in 2016, China’s state-owned power distribution company took over a 24 per cent stake in the Greek ADMIE electricity distributor. Both sides constantly emphasize that it is not just about economic exchange, but also cultural exchange.
Unlike Croatia and Greece, Serbia is not a member of the EU, but it also has an important place as a corridor through the Balkans. The largest Chinese investment was the Zemun-Borča bridge across the Danube. Out of the total of EUR170m costs EUR145m was financed by China’s Exim-Bank, and construction works were carried out by a Chinese firm. But this bridge is just the beginning of major projects. Thus, for EUR1.6bn, China Railways International and China Construction Company should build a fast railroad between Belgrade and Budapest to be completed in 2023. Chinese companies are controlling steel factory in Smederevo, a company with the greatest potential for export in Serbia, and they also threw around on the Bor-Mining Smelter Basin. Despite the risks, Chinese investments are welcome in many countries as they promise to revive the economy. And China does not link any political conditions with its investments.
However, Friedrich Ebert and SIPRI Foundation studies have shown that China is not only important for trade and economy, but also that it wants to have a political influence. That is why Europeans would benefit to develop their own strategic vision in order to respond adequately to the Chinese project. But there is no such vision yet. At this moment, Brussels does not speak unanimously and does not have a strategic answer.
Vedran Obućina is an analyst and a journalist specializing in the Croatian and Middle East domestic and foreign affairs. He is the Secretary of the Society for Mediterranean Studies at the University of Rijeka and a Foreign Affairs Analyst at The Atlantic Post.