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