China pledges to invest in EU infrastructure

Asian giant said to be seeking greater influence through chequebook diplomacy

CHINA will pledge a multibillion-dollar investment in Europe’s new infrastructure fund at a summit on June 29 in Brussels, according to a draft communiqué seen by Reuters – Beijing’s latest round of chequebook diplomacy to win greater influence.

While the exact amount is still to be decided, the pledge will mark the latest step in China’s efforts to shape global economic governance at the expense of the US, and follows major EU governments’ decision to join the Chinese-led Asian Infrastructure Investment Bank (AIIB).

It is expected to come with a request for return investment in China’s westward infrastructure drive – the “One Belt, One Road” initiative – constructing major energy and communications links across central, west and south Asia.

“China announced that it would make (X amount) available for co-financing strategic investment of common interest across the EU,” the draft final statement says, adding that agreements will be finalised at another meeting in September.

An EU diplomat said the Chinese contribution was likely to be “in the billions”.

EU and Chinese officials have said that Chinese banks are looking mainly at telecoms and technology projects.

Chinese Premier Li Keqiang, who will attend the summit in Brussels, will agree with EU leaders that the

315 billion (R4 trillion) fund will “create opportunities for China to invest in the EU, in particular in infrastructure and innovation sectors”.

If sealed, the deal would be a success for European Commission president Jean-Claude Juncker, who faced scepticism last year when he proposed the European Fund for Strategic Investment, because EU governments were putting in little seed money.

France, Germany, Italy and Poland have announced they will contribute 8bn, while Spain and Luxembourg have pledged smaller contributions.

The bloc is relying mainly on private investors and development banks to fund projects selected from an initial list of almost 2 000 submitted by the 28 member states, from air- ports to flood defences, that are together worth 1.3 trillion.

Questions

A big Chinese investment might raise questions about governance of the fund, which is strictly a European institution. An EU diplomat said it was not known whether China would seek representation commensurate with its stake.

The decision to invite China into an EU fund could cause some friction with Washing- ton, which is wary of Beijing’s rising influence and upset that Europe rebuffed its calls to stay out of the AIIB.

China is testing the US’s dominance in Latin America, offering the region $250bn (R3 trillion) in investment over the next decade, while Chinese firms have poured money into Africa to guarantee commodity supplies in exchange for building roads, hospitals and rail lines.

The US and human rights groups complain that China is wielding influence partly through corruption and turning a blind eye to labour and environmental standards and human rights. – Reuters