Following the route of the Silk Road, the Belt and Road Initiative (BRI) is China’s global development strategy with the vision of creating trade and infrastructure networks across Eurasia. Estimates put China’s investments at $200bn so far, with forecasts that spending will top $1trn by 2025.
In March 2019, Italy was the first major European economy and first G7 member to join the Chinese initiative which alarmed its long-standing alliances, not to mention Brussels. Despite this, Chinese influence through the BRI has been present in Europe for several years. The Chinese State-Owned shipping company, COSCO, acquired Piraeus Port, Greece, in August 2016 and just over two years later, a Memorandum of Understanding (MoU) was signed for it to join the BRI. After several turbulent years, the Greek economy appears to be fairly stable and no doubt the Chinese influence and investment will help ensure this continues. Through that lens, the investments are attractive and it is not only Greece that has recognised this, Chinese companies have stakes in over 12 ports across 6 European countries. Europe is inviting to China too, not only because Europe imports over $1bn of goods a day but for strategic reasons.
As the US-China trade war simmers away, China is keen to spread commercial influence elsewhere across the world. What’s interesting is the BRI looks to be interested in the developing countries in the EU. Previous investments in developing countries have resulted in mixed fortunes for China. For example, the port of Hambantota project failed after the China Harbour Engineering Company finished construction. Feasibility reports expected this and warned of failure. China had to step in to operate the port, and now owns and leases it to Sri Lanka.
But this goes both ways; developing countries in Europe like Slovenia and Croatia could greatly benefit from investment to boost economic activity, create jobs and improve infrastructure. Croatia, for example, has been facing some financial issues with its ports and shipbuilding yards in recent months and is currently looking to China for investment. Meanwhile, Slovenian minister is presently in China promoting Koper port and planned railway connection, after the operator of Koper explained that investing in North Adriatic Ports Association (NAPA) would only strengthen trade.
The are other benefits to investing in southern European ports too, they’re located close the Suez Canal, the quickest sea trade route between China and Europe.
The prospect of BRI investment is potentially inviting for developing European countries. It seems, though, the EU is wanting to warn against individual deals and would rather the EU negotiate as a single market. In the aftermath of Italy joining the BRI, it’s been said it would be benefited from acting with other EU counties and negotiating with China from a position of strength, instead it decided against this and potentially becoming vulnerable to the pitfalls that come with the BRI.
Source: Transport Intelligence, June 13, 2019
Author: Holly Stewart
