China’s grow­ing eco­nomic role in Greece and Europe could cre­ate se­cu­rity prob­lems for Amer­ica

Financial Mirror (Cyprus) - - FRONT PAGE -

China’s “One Belt, One Road” ini­tia­tive aims to de­velop a string of ports, lo­gis­tics hubs and other in­fra­struc­ture from Asia to Europe. Since 2010, China has in­fused Europe with a lot of cash, and Greece is one ex­am­ple of a Euro­pean coun­try that has in­creased eco­nomic ties with China to im­prove its econ­omy. What hap­pens in Europe mat­ters to Amer­ica be­cause the U.S. de­pends on the Euro­pean Union for much of its com­mer­cial ac­tiv­ity, and most of the mem­bers be­long to the North At­lantic Treaty Or­ga­ni­za­tion (NATO) which pro­vides col­lec­tive se­cu­rity. The West should cau­tiously ac­cept Chi­nese fi­nan­cial in­vest­ments in Europe as fu­ture mil­i­tary de­ci­sions may be held at risk to align with Bei­jing’s in­ter­ests.

China is mo­ti­vated to con­duct fi­nan­cial transactions abroad to boost its econ­omy and spread its in­flu­ence through­out the globe. Since the Euro­pean Union (EU) has been suf­fer­ing from debt crises and high un­em­ploy­ment, it is in need of for­eign back­ing. Bei­jing has been ac­tively in­vest­ing in en­ergy, real es­tate, agri­cul­ture and food, and other sec­tors in many Euro­pean coun­tries, be­com­ing China’s sec­ond largest trad­ing part­ner. Since Amer­ica has a strong trad­ing re­la­tion­ship with the EU, third-party transactions that take place there could di­rectly af­fect U.S. eco­nomic con­di­tions.

Most re­cently, the China Ocean Ship­ping Com­pany closed a deal with Greece to own a ma­jor­ity stake of its largest port, Pi­raeus. China plans to trans­form the har­bor into a key Mediter­ranean hub by de­vel­op­ing a rail­way from the dock to other parts of Europe, serv­ing as a gate­way for Chi­nese prod­ucts into Europe. Alibaba, a Chi­nese on­line re­tailer, is work­ing with Athens to boost elec­tronic trade by in­creas­ing ac­ces­si­bil­ity of Greek prod­ucts to other mar­kets. Hope­fully, the in­creas­ing eco­nomic ties be­tween Bei­jing and Athens will re­sult in more jobs and growth for Greece, a coun­try in dire need of both with an un­em­ploy­ment rate of 25%. Greeks should take ad­van­tage of the in­crease in trade routes to in­crease ex­ports such as olive oil and wine, and work with China and other for­eign in­vestors to iden­tify other ways to stim­u­late growth in the econ­omy.

Some Greeks fear that that they will suf­fer job cuts and de­creased wages now that China has pri­va­tized most of the port. Sadly, Greece has no other op­tion but to ac­cept for­eign in­vest­ments to im­prove its econ­omy — its cred­i­tors re­quire the cre­ation of a pri­va­ti­za­tion fund of 50 bil­lion euros ($55 bil­lion) as a re­sult of its third bailout agree­ment. Money for the fund is to come from either sell­ing its as­sets or prof­its gen­er­ated from manag­ing as­sets. Greece’s cred­i­tors claim the fund acts as an in­surance pol­icy that its debt will be re­paid, but Athens is in the dif­fi­cult po­si­tion of hav­ing to sell its re­sources to in­vestors – re­sources that could po­ten­tially help the econ­omy grow if man­aged well. It is im­por­tant for Bei­jing to be sen­si­tive to the fact that Greeks no longer have any say in their econ­omy and to not abuse cap­i­tal­ism by im­ple­ment­ing fair la­bor and wage prac­tices. It is up to the Chi­nese to gain the trust of Greek cit­i­zens and it is up to the Greeks to adapt and make the best of the cur­rent sit­u­a­tion by ramp­ing up pro­duc­tiv­ity and in­creas­ing ex­ports.

Some ar­gue that closer eco­nomic ties be­tween mem­bers of the Euro­pean Union and Bei­jing will al­low for bet­ter co­op­er­a­tion be­tween China and the West. Bei­jing’s in­vest­ments in Europe could im­prove the in­ter­na­tional eco­nomic sys­tem by in­creas­ing world­wide de­mand and by creat­ing more jobs and stronger economies. How­ever, oth­ers be­lieve Bei­jing’s true in­ten­tion is to spread in­flu­ence on a weak­ened and di­vided con­ti­nent, Europe.

China’s surge of fi­nan­cial in­vest­ments in Greece and Europe could re­sult in un­in­tended se­cu­rity con­cerns in the fu­ture. If Euro­pean coun­tries be­come too eco­nom­i­cally de­pen­dent on China, they may side with Bei­jing when it comes to NATO se­cu­rity con­cerns in­volv­ing China or its al­lies in­clud­ing North Korea and Rus­sia. No real vot­ing takes place at NATO be­cause the al­liance only makes a de­ci­sion when ev­ery mem­ber col­lec­tively agrees. This means it would take only one coun­try to with­hold sup­port on a path for­ward to pre­vent an ac­tion by NATO that is not in the in­ter­est of China.

Fur­ther­more, Bei­jing likely will feel the even­tual need to pro­tect its com­mer­cial as­sets in Europe by de­vel­op­ing mil­i­tary ca­pa­bil­i­ties and be­com­ing more in­volved in mil­i­tary mis­sions abroad. Dji­bouti is one ex­am­ple of a coun­try that has re­ceived sev­eral Chi­nese fi­nan­cial in­vest­ments to de­velop a port and rail­way con­nec­tion. Now Dji­bouti will be home to China’s first over­seas naval base with the de­ploy­ment of thou­sands of troops and mil­i­tary staff. Rus­sian and Chi­nese navies even con­ducted a mil­i­tary ex­er­cise in the eastern Mediter­ranean last year, Joint Sea 2015. Such ac­tiv­ity will likely in­crease as Bei­jing’s eco­nomic stake in the re­gion grows, es­pe­cially as the eastern Mediter­ranean be­comes a new source of oil and gas.

The West must tread cau­tiously when ac­cept­ing Chi­nese eco­nomic deals. Right now, China is us­ing its fi­nan­cial soft power to help Euro­pean coun­tries such as Greece im­prove their economies, but it could evolve into flex­ing mil­i­tary hard power. Bei­jing will likely se­cure its fi­nan­cial as­sets mil­i­tar­ily, just like it did with its first naval base in Dji­bouti and with the Rus­sian-Chi­nese naval ex­er­cise in the eastern Mediter­ranean last year. If NATO coun­tries are de­pen­dent on Bei­jing to stay eco­nom­i­cally afloat, that could sway dis­cus­sions when at­tempt­ing to make de­ci­sions to sup­port the West’s se­cu­rity in­ter­ests that in­volve China or its al­lies.

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