In­vest­ments start to di­vide world’s sec­ond-largest eco­nomic bloc

The Washington Times Weekly - - Politics - BY AUSTIN DAVIS AND KAROL BULSKI

WAR­SAW, POLAND | China’s tril­lion­dol­lar Belt and Road ini­tia­tive has taken Cen­tral Asia and Africa by storm as de­vel­op­ing coun­tries line up for Bei­jing’s money to break ground on pricey, Chin­abacked and China-fi­nanced in­fra­struc­ture projects.

But some an­a­lysts say the Euro­pean Union and its prized sin­gle mar­ket, the sec­ond-largest econ­omy in the world in terms of pur­chas­ing power, is Bei­jing’s real endgame.

As Bei­jing courts East­ern and Cen­tral Euro­pean states in or­der to bet­ter ac­cess lu­cra­tive West­ern Euro­pean mar­kets, the Euro­pean Union’s lead­ing pow­ers — France and Ger­many — are con­cerned that Chi­nese in­vest­ment in the bloc’s newer and less-pros­per­ous states will in­crease Bei­jing’s in­flu­ence in the re­gion and only widen the ide­o­log­i­cal rift be­tween the east­ern and west­ern halves of the Con­ti­nent.

Hun­gary and Poland, al­ready feud­ing with EU lead­ers in Brus­sels on such hot­but­ton is­sues as im­mi­gra­tion and civil lib­er­ties, may be drawn to China’s far less judg­men­tal ap­proach to in­vest­ment and de­vel­op­ment.

China’s East­ern Euro­pean am­bi­tions even have a bu­reau­cratic base — the 16+1 Group link­ing China with 16 coun­tries along Europe’s east­ern flank from the Baltics to the Balkans. It in­cludes 11 coun­tries that are also mem­bers of the EU.

Vik­tor Or­ban, the na­tion­al­ist Hun­gar­ian prime min­is­ter who has feuded re­peat­edly with the EU’s west­ern pow­ers, hosted the 16+1 an­nual sum­mit in Bu­dapest in Novem­ber. Ac­cord­ing to the Cen­ter for Strate­gic and In­ter­na­tional Stud­ies in Washington, Chi­nese com­pa­nies backed by gov­ern­ment banks have an­nounced plans for $15 bil­lion in roads, rail­ways, util­ity plants and other in­fra­struc­ture since 2012 in the 16 coun­tries.

While many of the gov­ern­ments in­volved in­sist they are not seek­ing a break with the EU or the West, Mr. Or­ban re­cently told re­porters that “the world’s eco­nomic cen­ter of grav­ity is shift­ing from west to east. While there is some de­nial of this in the West­ern world, that de­nial does not seem to be rea­son­able.”

Ste­fan Meis­ter, who heads the Robert Bosch Cen­ter for Cen­tral and East­ern Europe, Rus­sia and Cen­tral Asia at the Ger­man Coun­cil for For­eign Re­la­tions in Ber­lin, said in an in­ter­view that “the main aim [for China] is not Cen­tral or East­ern Europe, but its com­plet­ing the Belt and Road in­fra­struc­ture via th­ese coun­tries.”

“The side ef­fect is that you can use all of the weak spots to block other de­ci­sions which are linked to China,” he said.

Oth­ers say the fear is overblown. De­spite the wor­ried analy­ses of the past five years, Chi­nese di­rect in­vest­ment in in­fra­struc­ture — par­tic­u­larly in the re­gion’s EU and NATO states — has been neg­li­gi­ble. De­spite the grandiose prom­ises and bal­ly­hooed roll­outs, many of the most am­bi­tious projects have yet to break ground.

But the pos­si­bil­ity of a con­ti­nen­tal di­vide spurred by the lure of easy Chi­nese fi­nanc­ing has clearly caught the at­ten­tion of the EU’s tra­di­tional pow­ers.

Ger­man For­eign Min­is­ter Sig­mar Gabriel warned in a speech in Septem­ber, “If we do not suc­ceed in de­vel­op­ing a sin­gle strat­egy towards China, then China will suc­ceed in di­vid­ing Europe.”

Launched in 2013 un­der in­creas­ingly pow­er­ful Pres­i­dent Xi Jin­ping, China’s Belt and Road ini­tia­tive has sought to de­velop mod­ern trans­porta­tion links through­out 64 coun­tries, com­ing into con­tact with 60 per­cent of the world’s pop­u­la­tion and a third of its econ­omy along the way.

The project is the cen­ter­piece of a mul­ti­pronged ef­fort by Mr. Xi to use China’s soar­ing eco­nomic clout as a means to re­shape the global fi­nan­cial and po­lit­i­cal bal­ance of power.

China’s vast gov­ern­ment cur­rency re­serve that can be used to un­der­write overseas in­vest­ments has been a prime en­gine of Bei­jing’s drive for greater promi­nence, giv­ing it in­flu­ence and lever­age in South­east Asia, Africa and Latin Amer­ica.

Last year alone, China put $81 bil­lion into Europe in for­eign di­rect in­vest­ments, up 76 per­cent from 2016, ac­cord­ing to a re­port by law firm Baker McKen­zie.

Bri­tain, the Netherlands and Switzerland re­ceived the most Chi­nese cap­i­tal last year, but some $9 bil­lion has flowed through the EU’s east­ern and cen­tral states as part of the Belt and Road ini­tia­tive. Last year, China es­tab­lished an $11 bil­lion in­vest­ment fund for the re­gion and promised an ad­di­tional $3 bil­lion at the Novem­ber sum­mit in Bu­dapest.

Projects un­der­way

The fruits of Chi­nese largesse in the re­gion aren’t quite as vis­i­ble as else­where in the world, but notable projects have al­ready drawn at­ten­tion.

Seen as the “dragon head” of its Belt and Road ini­tia­tive in Europe, China’s sta­te­owned ship­ping firm, the China Ocean Ship­ping Co., agreed in 2016 to in­vest some $1.24 bil­lion into Pi­raeus, Greece’s largest port. At the time of the an­nounce­ment, the firm bought a 67 per­cent stake in Pi­raeus for $457.5 mil­lion and pledged $620.9 mil­lion to mod­ern­ize ship­ping fa­cil­i­ties over the course of time, ac­cord­ing to re­ports.

With Pi­raeus as China’s gate­way to the Con­ti­nent, goods will be shipped through Cen­tral and East­ern Europe via a pro­posed high-speed rail­way be­tween Bel­grade, Ser­bia, and Bu­dapest, Hun­gary, es­ti­mated to cost $3.8 bil­lion. Con­struc­tion on the project broke ground in Bel­grade in Novem­ber thanks to a $297.6 mil­lion loan from the Ex­port-Im­port Bank of China.

Con­struc­tion on the Hun­gar­ian por­tion ex­pected to start in 2020. Ex-Im is pro­vid­ing 85 per­cent of the credit needed to fund the project.


Chi­nese Pres­i­dent Xi Jin­ping spoke last year at the open­ing of the Belt and Road Fo­rum, where lead­ers from 29 coun­tries gath­ered to pro­mote a trade ini­tia­tive that has the po­ten­tial to in­crease Bei­jing’s global in­flu­ence.

Work at an in­ter­na­tional trade route in Pakistan is part of a sprawl­ing Chi­nese ini­tia­tive to build a “new Silk Road” of ports, rail­ways and roads to ex­pand trade in coun­tries across Asia, Africa and Europe.

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