Chinese Investments in Europe
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No. 57 May 2018 Chinese Investments in Europe Anil Wadhwa Former Ambassador, Senior Fellow & Cluster Leader Vivekananda International Foundation China’s OBOR Policy and th During the 19 Chinese Communist Party Evolution Congress in October, President Xi Jinping was clear that the goal is to place China firmly on the global centre stage by 2050. This aim will To put the issue in perspective, China be driven in part by Chinese investments in officially launched OBOR in autumn 2013 as a both industrialised and developing countries. foreign policy priority as opposed to a well- The 2008 financial crisis had left Europe with defined strategy. The stated aim was greater an estimated Euro 330 billion investment gap economic integration within Asia, between (Le 2017). China spotted this opportunity and Asia and Europe and between Asia and Africa boosted its investments in Europe massively mainly through connectivity and infrastructure since 2010. projects, with transport, energy and telecommunications being emphasized in the Europe, with its free trade policies, now faces a first phase. It is generally understood, however, Chinese buying and acquisitions onslaught, that the origin and motivation of launching given the emergence of a combination of state OBOR stemmed from a push for development owned large conglomerates and aggressive of China’s western regions, the export of Chinese policies of investment in Europe’s overcapacity and excess savings, against technology and infrastructure sectors. Chinese political and strategic considerations by investments had earlier focused mainly on Chinese leadership. infrastructure projects in distressed Southern European countries since the economic crisis By and large, European response to OBOR had offered opportunities in countries like projects has been enthusiastic. Formal OBOR Portugal, Greece, Italy and Spain. But stronger projects in the EU have traditionally involved concerns have now arisen due to recent container terminals and railways. For example, Chinese targeting of Northern Europe with an China now has a controlling stake in the Greek eye on the technology sector. port of Piraeus (Financial Times 2016a), seen as a gateway to Asia, Eastern Europe and North Africa. Chinese companies have either invested or have shown interest in investing in The ICS is an interdisciplinary research institution, which has a leadership role in the promotion of Chinese and East Asian Studies in India. The ICS Analysis aims to encourage debate and provide informed and balanced inputs for policy formulation and is based on extensive research and interactions with a wide community of scholars, experts, diplomats and military personnel in India and abroad. Belgium, Netherlands, Croatia, Slovenia, Italy, response to the Chinese initiative and several Portugal, Spain, Latvia and Lithuania in the meetings have been held. (Putten et al. 2016) port sector. In the railway sector the planned China judiciously proposed that OBOR is construction of a new Belgrade – Budapest complimentary to European development plans railway by Chinese companies has been and also invited suggestions from the notable (Xinhua 2017).In addition, China Europeans themselves. Within OBOR, China Europe rail services are increasing in number has targeted Eastern European and and frequency. Chinese freight companies Mediterranean countries. The 16 + 1 connect cities in China with cities in Poland, mechanism involves meeting with 16 Central Germany, The Netherlands, Belgium, France and Eastern European countries as also some and Spain. Several European airports have not part of this mechanism such as Belarus, attracted Chinese investments (including Moldova and Ukraine and sectoral cooperation Parchim in Germany) (ChinaDaily.com 2007)) mechanisms (agriculture and maritime or expressions of interest (such as kastelli in cooperation) with Southern European Greece) (Tartar, Rojanasakul and Diamond countries. 2018). China has targeted the UK for its role in internationalizing its currency Ren Min Bi or Yuan for its relevance to OBOR projects. By On balance, many OBOR activities in organizing international conferences China Europe remain related to projects gathers ideas which are helpful in fine tuning conceived before 2013 as far as its OBOR projects and capabilities. On infrastructure is concerned, but balance, many OBOR activities remain related transportation hubs are developing in to projects conceived before 2013 as far as anticipation of Chinese financing. infrastructure is concerned, but transportation hubs are developing in anticipation of Chinese financing. The extent to which European firms Chinese companies like COSCO also provide will cooperate in Chinese led projects in third logistics for Taiwanese and HP products in countries however, remains unclear. As the Europe through ports in which they have a global context of Europe China relations presence like Piraeus (Putten and Meijnders changes, transcontinental integration seems 2015). Chinese have in mind Italy as well for even more appealing to Europe. both sea based and land based connections. As described by European Think-Tank Network on China (ETNC), the five ports alliance, a Shifting Emphasis in Chinese major container terminal project in Northern Adriatic that involves ports in Italy, Slovenia, Investment Patterns and Croatia appears to be a regional response to the new Silk Road (Putten et al. 2016). It What started off as an investment idea in also detailed the following development in infrastructure and connectivity under OBOR as China-Europe connectivity: a freight train the Chinese looked at controlling the logistical started between Chengdu and Tilberg in April chain for export capabilities, has gradually 2016, the Lodz- Chengdu -Xiamen and the transformed into a Chinese policy of Suzhou- Warsaw connections in Poland started encouragement for Chinese companies and in September 2013. entities to acquire “high and new technologies” and “advanced manufacturing capabilities” China has started financing of projects such as along with infrastructure investments that can the central international airport, high speed rail, further facilitate Chinese exports. As is known, container terminals and the establishment of China is pursuing an ambitious plan, called industrial parks. In Spain, there is an interest in “Made in China 2025”; aimed at moving the commercialising the touristic routes with Chinese economy away from the labour linkages to the silk route. A connectivity intensive and low value production towards platform has also been set up by the EU as a 2 INSTITUTE OF CHINESE STUDIES, DELHI ● MAY 2018 higher value and manufacturing in 10 key By acquiring more technology from foreign industries. companies and encouraging local companies to Currently, riding on the back of this plan, make new products based on that technology, China is emphasizing focus on areas like Chinese leaders hope to cement the country’s electric cars, machine tools, robotics, dominance in critical areas. They also see an semiconductors, artificial intelligence, medical opportunity to dictate the terms of the future technology, railways, aerospace, advanced development of technology and extract materials and information technology to licensing fees from foreign firms that use become the global leader and kick off the next technology developed in China. To reinforce phase of China’s development. China also the “Made in China 2025” plan, besides using released a “next generation artificial its growing wealth to buy into cutting edge intelligence plan” in July 2017, which promises technologies, China is moving ahead with huge policy and financial state support in creating special courts to handle intellectual pursuit of expansive goals between now and property disputes and awarding subsidies to 2030 (The State Council of the People's entrepreneurs who file patent applications (The Republic of China 2017). Private enterprises Straits Times 2017). and Universities have been called upon to make China the “world’s primary artificial intelligence center” (The State Council of the China’s investment idea in People's Republic of China 2017) infrastructure and connectivity under OBOR has gradually transformed into a Chinese policy of encouragement for A joint research published by the New York Chinese companies and entities to based research consultancy Eurasia group and acquire “high and new technologies” Beijing based Sinovation ventures on and “advanced manufacturing December 6 concludes that while China capabilities” along with infrastructure currently lags behind the USA in engineering investments. talent and hardware required to build effective “autonomous artificial intelligence” – robots, self-driving cars and other physical machines, China enjoys the advantage of massive pool of China is exploring how Artificial intelligence data due to high internet usage, mobile apps, (AI) and big data can be used to monitor the deployment of robots at a rapid pace by the everything from social media to credit card Chinese manufacturers, thus making it spending, and it plans to assign all citizens a inevitable that China will become a world social reliability rating to weed out potential leader in this field (Lee and Triolo 2017). trouble makers (Harrington 2018). The authorities are bringing technology companies The efforts reflect the views of Chinese into line with tough new laws and cyber officials that controlling global technologies security investigations. Chinese cyber hacks and standards are on par with