China's New Balkan Strategy
Total Page：16
File Type：pdf, Size：1020Kb
Volume 1 ▌Number 2 ▌August 2011 CHINA’S NEW BALKAN STRATEGY Loïc Poulain Part I: Resurrecting the Silk Road * * * Averaging a staggering 10 percent for the past decade, the rapid growth of the Chinese economy has been a powerful driver for the expansion of Eurasian trade. Dur- Communist China did not assume a direct role in the ing the same period of time, bilateral exchanges between volatile Balkan region until the late 1970s. Despite robust Europe and China almost quadrupled, jumping to EUR cooperation with Albania, mainly built upon a shared op- 395 billion in 2010 from EUR 101 billion in 2000, to form position to Soviet claims of world communist leadership, it the second-largest economic relationship in the world. To was not until the summer of 1978 that Beijing articulated assert its economic ascendency on Europe, Beijing has a coherent policy to deal with Southeastern Europe. focused on tapping the Balkan Peninsula’s unexploited business potential by making strategic investments in For a post-Mao leadership, the Balkan region had then Greece, and drafting long-term plans for a modern Silk become an important element in a broad diplomatic offen- Road across the Eurasian landmass. sive meant to secure a foothold in the Soviet Union’s sphere of influence, open up to the Third World, and A Blooming Chinatown forge valuable relationships with nations which could help modernize the Middle Kingdom. In effect, China severed China’s trade relations with Southeastern Europe initially ties with Enver Hoxha’s Albania to develop tighter eco- focused on developing exchanges with the region’s larg- nomic, political, and personal bonds with Josip Broz Tito’s est markets, coincidentally corresponding to the countries Yugoslavia and Nicolae Ceauşescu’s Romania. on track to joining the European Union (Romania, Bul- garia, and Croatia). In 2010 bilateral trade with Romania However, the fall of the Iron Curtain and the bloody disin- amounted to EUR 2.6 billion, while business with Zagreb tegration of Yugoslavia prevented China from sustaining and Sofia was valued at EUR 1.1 billion and EUR 630.5 strong links with Southeastern Europe. As the Balkan re- million, respectively. However, when compared to similar- gion is returning to stability, the time has come for Beijing sized EU markets, the data shows these figures have the to invent a new strategy and spread its influence through potential to increase tenfold: Austria – with a population increased trade, clean energy investments, and embry- similar to Bulgaria’s – registered a EUR 8.2 billion-worth onic political alliances. two-way trade with China last year. Aside from Albania and the small Montenegrin market, chun International Group partnered with Turkey's Kürüm where China has become the second trade partner after Energy, Resources and Metallurgy to form Illyria Mineral the EU, the Western Balkan region also retains untapped Industry and develop Albanian ferro-chrome exports to business potential. Indeed, bilateral exchanges with Ser- China. Endowed with large deposits of iron and copper bia amounted to only EUR 325 million in 2010, despite a ore, Bosnia-Herzegovina and Kosova could soon wel- 20 percent year-to-year increase, ranking China 8th come similar projects. Local machinery companies are among Belgrade’s associates. Similarly, with commercial also in high demand on the ever-growing Chinese mar- exchanges at EUR 107 million, Beijing is Macedonia’s 7th ket. Regional industrial leaders such as Serbia’s me- largest business partner, while it accounted for only 0.6 chanical and engineering company Goša FOM, Roma- percent of Bosnia-Herzegovina’s international trade with nia’s tool manufacturer World Machinery Works, or Bul- EUR 43 million last year. garia’s forklift producers Balkancar Record Company and Di-Ven all have the potential to assert their position in Yet, Southeast European markets have great potential for China, where they can successfully compete with pricier affordable Chinese products. Beijing has therefore aimed Western products. at boosting exports to the region by setting up Chinese trade centers close to major roadways and densely popu- lated areas. The largest Chinatown in the Balkan region opened on 19 July 2011 in Afumati, a small city on the outskirts of Bucharest, where some 1240 stores covering 40 hectares now sell Chinese products straight to the Ro- manian capital’s two million inhabitants. Elsewhere, the “China Trade Center Zmaj” was inaugurated near Bel- grade in June 2010, imitated by Zagreb’s Chinatown Cen- ter two months later. In Bulgaria, negotiations are cur- rently being carried out to launch a similar business zone for Chinese imports in Bozhurishte, ten miles north of the capital Sofia. Chinese enterprises not only compete on local markets, they also build manufacturing bases in the region. In No- vember 2009, state-owned auto-giant Dongfeng struck an AFP/Getty Images agreement with Serbian truck maker Fabrika Automobila Priboj (FAP) to assemble vehicles in Serbia. Chinese car Greece: the European Node maker Great Wall Motor Co and Bulgarian company Litex Motors also started rolling out low-cost cars in February To increase commercial exchanges with Southeastern 2011. As such, the region serves as a “training ground” Europe, China has made considerable investments in for Chinese companies to gain the industrial maturity and Greece. Since the onset of the country’s debt crisis, Bei- technological sophistication necessary to successfully jing has been playing a proactive role by supporting the enter Western markets. Southeastern Europe also allows purchase of Greek bonds, announcing plans to double its China to circumvent the EU’s anti-dumping regulations annual trade with Athens to USD 8 billion by 2015, and and export products directly to a market of some 800 mil- setting-up a special Greek-Chinese shipping develop- lion people thanks to free-trade agreements with the EU, ment fund of USD 5 billion. Russia, and Turkey. More strategically, at the height of the financial crisis, in Beijing is also eager to enhance Balkan imports. China November 2008, Chinese President Hu Jintao signed a has been placing chips on regional mineral exploitation to EUR 3.4 billion agreement to allow the state-owned help sustain the high growth rate of its economy. China’s China Ocean Shipping Company (COSCO) to upgrade largest metals trader China Minmetals Corporation signed and run part of the country’s chief port in Piraeus. The a USD 800 million deal with Aurubis Bulgaria, a local sub- deal’s entry into force on 1 October 2009 also allowed sidiary of Europe’s leading copper smelter, in October COSCO to enhance the port’s capacity by building a third 2009. Six months later, in April 2010, Sichuan Jiannan- pier. The pending construction of a logistics hub in nearby Attica should help attain the goal of tripling operations up ing moved by road or rail through the Eastern Balkans to 3.7 million containers by 2015. Ahead of these pro- onto Central Europe or the former Soviet Union. jects, Beijing has already decided to gradually stop using the ports of Naples and Istanbul to redirect maritime traf- Planned for the end of 2013, the completion of Pan- fic toward Greece. European Corridor X will reconnect Western Europe to Turkey by knitting together the former Yugoslav republics Furthermore, COSCO is bidding to operate the port of along the old Brotherhood and Unity Highway. However, Thessaloniki, linked by rail to the rest of the Balkan Pen- the slow development of the 10th pan-European rail corri- insula into Central Europe. The Chinese government is dor will hamper commercial traffic from relying on the also vying to buy shares of the struggling state-owned backbone of the Balkans. Thus, Chinese entrepreneurs Hellenic Railways Organization (OSE), scheduled to go and the China Development Bank (CDB) recently ex- up for privatization in the years to come as part of the pressed great interest in financing and building the EUR massive Greek deficit-reduction plan. Such a move would 4.5 billion railway passing through Serbia and the Bel- allow the rapid delivery of Chinese products transiting grade-South Adriatic highway. To convince Serbian au- through Greece. thorities, China could deploy advantageous financing similar to the conditions offered for the construction of the This planned Chinese takeover of maritime and rail as- EUR 170 million Zemun-Borča Bridge. Belgrade’s so- sets intends to transform Greece into a Southern rival for called “Serbian-Chinese Friendship Bridge”, set to link Northern Europe’s Rotterdam. Indeed, the country’s stra- both banks of the Danube in 2014, will indeed be built by tegic position makes it easier for container ships trans- the China Road and Bridge Corporation (CRBC), fi- porting Chinese goods to travel from East Asia to Europe nanced at 85 percent by a low-interest loan from the Ex- via the Suez Canal. It also provides an ideal base to port-Import Bank of China. reach emerging markets in the Mediterranean Basin and the Black Sea region. In other words, Beijing sees By investing in the region’s infrastructure projects, Beijing Greece as a modern gateway linking Chinese factories wants to accelerate the creation of a network of ports, with consumers across Europe, the Middle East, and logistics centers, and railways to distribute Chinese prod- North Africa. ucts and hasten the speed of East-West trade. Indeed, the great commercial integration of Europe and China reveals the incredible potential of a transcontinental trade route linking both markets. Beijing is therefore attempting to resurrect the ancient Silk Road to improve transport and trade through the Eurasian landmass. This new route, complementing a “Silk Track” railway, would run from Western China through Central Asia, Iran, Turkey, and across the Bosporus onto the Balkan Peninsula to boost connections with Europe and the Middle East.