China’s eco­nomic ten­ta­cles are grab­bing South­ern Eu­rope

The Sunday Guardian - - & Comment Analysis - JOHN DOB­SON

Next month Chi­nese Pres­i­dent Xi Jin­ping is un­der­tak­ing a state visit to Spain and Por­tu­gal, ce­ment­ing China’s quiet diplo­matic and eco­nomic progress in th­ese coun­tries. Italy is also be­ing se­duced by Chi­nese money, fol­low­ing the suc­cess in the polls by the un­likely pop­ulist mar­riage of the anti-estab­lish­ment Five Star Move­ment and the right-wing Lega. Italy is in trou­ble with the Eu­ro­pean Union (EU), with its re­cent bud­get pro­pos­als which do not con­form to Brus­sels’ rules, so it’s not sur­pris­ing that mega-dol­lar temp­ta­tions wafted over the heads of Italy’s politi­cians are too tempt­ing to re­sist. Greek politi­cians have al­ready suc­cumbed. China’s eco­nomic ten­ta­cles are firmly grab­bing South­ern Eu­rope.

Take a look at some of the larger in­vest­ments made by China in South­ern Eu­rope. In Por­tu­gal, the Three Gorges Cor­po­ra­tion, a Chi­nese sta­te­owned com­pany, has taken a share in the en­ergy com­pany, En­er­gias de Por­tu­gal and is cur­rently bid­ding for ma­jor­ity con­trol. China is also in dis­cus­sion for the lease on the ma­jor strate­gi­cally lo­cated port of Sines, a key ob­jec­tive for China’s Belt and Road Ini­tia­tive (BRI) stretch­ing into Eu­rope. Add to this China’s stakes in Por­tu­gal’s na­tional car­rier Trans­portes Aereos Por­tugue­ses, real es­tate com­pa­nies and me­dia groups, the pic­ture be­comes clear.

Greece’s re­la­tion­ship with China goes back to 1979 when Prime Min­is­ter Kon­stanti­nos Kara­man­lis vis­ited Bei­jing. Suc­ces­sive Olympic Games in Athens (2004) and Bei­jing (2008) also played a cru­cial role in the closer re­la­tion­ship that be­gan that decade. How­ever, it was the fi­nan­cial shock that moved the Sino-Greek re­la­tion­ship into a new phase. It’s no sur­prise that China has taken a strong in­ter­est in Greece, which hosts one of the re­gion’s best har­bours and is well con­nected to the Near East, South Eu­rope and North Africa. Greece is now at the heart of the mar­itime Silk Road.

If you go down the road from Athens to its port city Pi­raeus you will see the huge com­mer­cial and pas­sen­ger ter­mi­nals awarded to the Chi­nese state-owned ship­ping gi­ant China Over­seas Ship­ping Com­pany (COSCO) on a 30year con­ces­sion fol­low­ing the 2008 fi­nan­cial cri­sis. COSCO paid $570 mil­lion for the con­ces­sion, said at the time to be five times the mar­ket value. Since then it has in­vested a fur­ther $300 mil­lion in the ex­ist­ing ter­mi­nal, turn­ing it from a strug­gling har­bour, worn down by decades of in­dus­trial de­cline and the ef­fects of the coun­try’s pro­tracted debt cri­sis, into the port of en­try into South­ern Eu­rope with the aim of tar­get­ing op­por­tu­ni­ties in Balkan and Mediter­ranean coun­tries. There has been no pre­tence by Greece’s lead­ers about this ma­jor project. Dur­ing a visit to China, Prime Min­is­ter Alexis Tsipras de­clared that Greece in­tended to “serve as China’s gate­way into Eu­rope”. The fol­low­ing year he at­tended Bei­jing’s BRI sum­mit.

There even ap­pears to be com­pe­ti­tion be­tween the South­ern Eu­ro­pean coun­tries to be China’s best friend. Fol­low­ing Italy’s coali­tion suc­cess, the for­mer Shang­hai-based fi­nance pro­fes­sor, Michele Geraci, was ap­pointed Italy’s Un­der­sec­re­tary for Eco­nomic De­vel­op­ment. Geraci has long been a sup­porter of Chi­nese in­vest­ment in Italy, say­ing that the coun­try could be “China’s friend in the Mediter­ranean”. Chi­nese in­vestors have pur­chased the iconic Pirelli tyre man­u­fac­turer and the ma­chine tool maker Cifa. Chi­nese funds have found their way into the Ital­ian na­tional elec­tric­ity agency CDP Reti, the au­to­mo­bile man­u­fac­turer Fiat Chrysler, yacht maker Fer­retti, Tele­com Italia and the world fa­mous fash­ion de­signer Fer­rag­amo.

As mem­bers of the EU, th­ese coun­tries have a voice in all ma­jor EU de­ci­sions and an­nounce­ments and China’s eco­nomic power has be­come a pow­er­ful in­stru­ment of soft power in the re­gion, sub­tle but hugely im­por­tant. Take the case of China’s ex­pan­sion of ter­ri­tory in the South China Sea. In July 2016, the EU wanted to is­sue a strong state­ment crit­i­cal of Bei­jing af­ter the In­ter­na­tional Arbitration Court’s rul­ing on the South China Sea. In­stead, fol­low­ing ob­jec­tions by Greece, the EU is­sued a wa­tered-down ver­sion, de­liv­er­ing a sym­bolic vic­tory for China. The fol­low­ing year, Greece blocked an­other state­ment by the EU, this time in­tended to en­dorse a UN crit­i­cism of China’s hu­man rights. Fu­ri­ous EU diplo­mats com­plained that Greece’s block un­der­mined ef­forts to con­front Bei­jing’s crack­down on ac­tivists and dis­si­dents. Sens­ing the dan- gers of fi­nance and in­flu­ence, the Eu­ro­pean Com­mis­sion, backed by Ger­many and France, called for a more cau­tious ap­proach to­wards in­vest­ment in in­fra­struc­ture and tech­nol­ogy. Aware that their much-needed in­ward in­vest­ment might be af­fected, Greece was among sev­eral EU coun­tries which de­clared that they would not sup­port any such move.

China’s tar­gets in Eu­rope ex­tend well be­yond Por­tu­gal, Spain, Italy and Greece. In 2010, 16 Cen­tral and Eastern Eu­ro­pean (CEE) coun­tries, 11 mem­bers and five non-mem­bers of the EU, formed the so-called 16+1 group with China. The lat­est 16+1 sum­mit took place four months ago in Sofia, Bul­garia, at which over 20 co­op­er­a­tion doc­u­ments were signed. Not only does this pro­vide China with in­flu­ence and lever­age in the EU through both ex­ist­ing and aspir­ing mem­bers, but as China sits at the cen­tre of the CEE cir­cle, it is able to use its unique knowl­edge of each coun­try to am­plify its in­flu­ence.

There re­mains sub­stan­tial re­sent­ment of the EU in the eco­nom­i­cally weak re­gion of South­ern Eu­rope, alarmed by Ger­man hege­mony. Not only is there ris­ing anti-Eu­ro­pean sen­ti­ment, but early neg­a­tive at­ti­tudes to the “ar­rival of the Chi­nese” are less­en­ing as the pop­u­la­tions ben­e­fit from the in­vest­ments. Brus­sels ini­tially viewed Chi­nese ac­tiv­ity in the CEE re­gion with deep sus­pi­cion, con­cerned that it would af­fect the unity of the EU, un­der­mine its high-level stan­dards and ex­er­cise neg­a­tive in­flu­ence over EU mem­bers. Such para­noia is un­founded. China is a hugely im­por­tant part­ner for the EU and the EU should ac­cept that South­ern and CEE coun­tries have the le­git­i­mate right to de­velop sep­a­rate re­la­tions with China. If it fails to do this, Eu­rope’s splin­ter­ing pol­i­tics will lead to to­tal fail­ure of the 65-year project.

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